The cat is truly out of the bag. From old school stock traders to the average Joes of the world, it’ll be hard to ignore how monumental Coinbase listing is. It represents a landmark moment where the ‘old guard’ of traditional finance welcomes the new cool kid with ‘blockchain’ tattoos on the block. Something once thought to be an impenetrable wall. It really is such an inflection point in the awareness and future adoption of cryptos. Why? In this article I lay out my thoughts on the reasons that make it such a big deal.
Mind-blowing valuation off the gates
Coinbase direct listing defies gravity through its exorbitant $100B ballpark valuation. How is that possible? Well, it’s a company that in Q1 2021 alone generated $1.88B in revenue, it on-boarded an outrageous number of new clients, plus it enjoys over 6 million of monthly transacting users. Coinbase’s client base makes a mockery out of other disruptors in the space the likes of Robinhood and other big players. If you are interested to dig deeper into the less obvious details about the recent Coinbase earnings report, this blog post by Ellie Frost is a must read.
Other crypto exchanges may follow
The big dogs in the industry the likes of Binance, FTX, Kraken, are starting to make the right type of noises. In fact, it’s been reported by Bloomberg that Kraken has been aggressively soliciting new investment in an attempt to double the current $10 billion valuation. Others like FTX’s CEO Sam Bankman-Fried have already provided a sneak peek via Twitter of what the company might be worth. This suggests to me they may be entertained the idea of going public down the road now that Coinbase is setting the ball rolling.
Spillover into broader crypto sector
Dan Held, one of my favorite Bitcoin thinkers, writes that the effect of the Coinbase listing is likely to see a surge in the overall valuation of crypto companies (wallets, custodians, etc) due to the organic upswell of users. The rounds to raise new capital by all these companies will become more frequent and legit as the space grows exponentially. It’s a self-reinforcing dynamic.
Legitimises Bitcoin to accelerate adoption
With Coinbase and other crypto-related companies going public, it undeniably brings a new level of trust and legality into the industry. The more an asset class finds this legitimacy, the more the adoption curve accelerates. History provides clear examples of this exponential S curve growths in the penetration on the mobile phone or the internet. Let’s not forget for a second that Coinbase is the primary gateway of a pretty hefty percentage of all crypto activities in the marketplace. Coinbase business nature blending in with traditional markets is simply huge.
New type of investors to join
The offering is expected to be a watershed moment for cryptos as new investors not having skin in the crypto game take notice. Some investors don’t want to have direct exposure through Bitcoin but may be happy to do so through a publicly-listed entity. Others simply can’t for regulatory reasons. This float opens the floodgates to a new facet of investors.
Friendlier regulatory landscape
Besides, the listing will be the final admission that validates the industry as a whole and lessens the risk of hostile regulatory actions. As the financial world moves in tandem with the common interest to see the industry grow given the lofty levels of involvement by institutions, the bar is set higher for regulators to shake up the industry. The truth is that the more the total market capitalisation rises, the more legitimised the industry becomes. Plus, each big player brings with them an army of lobbyists ready to influence the regulatory environment in a positive manner.
Reinforces narrative of Bitcoin as store of value
Bitcoin’s purpose in an investment portfolio can be as a hedge against inflation, as a volatility calibrator given its non-correlated nature, as an alpha-generating bet, as an alternative against the debasing of the dollar and the exorbitant amounts of government spending and government debt, etc. Regardless, the one narrative that Bitcoin best embodies is to be a safe-haven asset. Other forms of value storage such as real state, bonds, currencies, art, you name it, still run capitalisations in the tens of trillions.With such an acceptance by the global investment community, emboldened by Coinbase listing and the network effect it creates, Bitcoin stands to win by absorbing a total addressable market in the tens of trillions.
Slow dissipation of the critics
Unless these people have no limits in how much they want to discredit themselves, the Coinbase listing can cause that such die-hard critics who consider Bitcoin worthless and destined to ‘go to zero’ get to slowly either change the tone or go radio-silent. Since these people may have an army of followers, that may too support the transitions from the laggard non-believers into believers.
Coinbase listing in line with Crypto principles
The icing on the cake is the type of listing Coinbase has chosen to proceed with. Instead of a traditional IPO (initial public offering), they’ve gone down the route of a direct listing approach. What’s the difference, you may think. Well, it bypasses investment bank underwriting. This is a clear indication of all the virtues such as decentralisation, disruption that blockchain embraces. What this means is that by adhering to such principles, it reinforces the notion to be perceived as a “crypto people’s exchange” as opposed to evil or traitor succumbing to traditional proceedings. This is sure to please the surging crypto community, which let’s face it, such conglomerated facet have become a powerhouse to influence the pricing. Ask Tesla short if in doubt.
To sum up, whatever the scenario that plays out, Coinbase is just a few hours away from being the new kid on the Nasdaq block that gets to hang out with the traditional financial peers. Quite a feat and certainly hard to envision just a year or so ago at the peak of distrust and negativity in the crypto market amid the COVID drama. Welcome to crypto, where things move at light-speed.
Such a fascinating time to be alive!