Wednesday April, 14th marks one of the most anticipated direct listings in the history of the NASDAQ exchange as cryptocurrency exchange Coinbase debuts as a publicly traded company. Unlike many companies that go public, Coinbase is already profitable, churning out a staggering $1.8 billion in revenue in the first quarter of 2021 alone. The NASDAQ exchange has officially announced that shares will begin to trade at $250 per share, which would potentially give Coinbase a market cap of $100 billion on its first trading day.
The cryptocurrency markets have been on fire in April, as the two largest tokens by market cap, Bitcoin and Ethereum, are both trading at new all-time highs as of the time of this writing. While some analysts believe that this is a sympathy play in anticipation of the Coinbase direct listing, technical analysis of the charts also show that Bitcoin was ready for a bullish breakout after hitting multiple resistance points around the $60,000 USD price limit. Ethereum has made headlines of late due to its value as a utility for its powerful Blockchain network that has been used to create the recent NFT or non-fungible token craze. While Ethereum trades at a fraction of what Bitcoin trades for, many crypto analysts believe that Ethereum will have more utility value than Bitcoin.
Coinbase’s rise to prominence is emblematic of a rapid change to the landscape of online digital currencies and investing. Cryptocurrencies have the full attention of many retail investors, particularly those from younger generations who are able to invest in the tokens on sites like Coinbase, Robinhood, and Square’s (NYSE:SQ) CashApp. But it has been reported that over half of the crypto reserves that are held on Coinbase belong to institutional investors and fittingly, companies like Square, as well as fintech rival PayPal (NASDAQ:PYPL) and more established payment companies like Visa (NYSE:V) and Mastercard (NYSE:MA) have all been accumulating Bitcoin in order to accept it as a form of payment. PayPal recently reported that it will allow its users to pay for goods and services online using cryptocurrencies at over 29 million different online merchants.
Coinbase is at the crossroads of a digital transformation of the payments sector, as well as offering its users to invest and earn interest in twenty-five different altcoins. While it may trail other crypto exchanges like China-based Binance which offers over 150 different cryptos, Coinbase has a fierce brand loyalty from crypto investors around the world. Coinbase will trump some of the biggest tech IPOs in recent memory including Palantir (NYSE:PLTR), AirBNB (NASDAQ:ABNB), Snowflake (NYSE:SNOW), and Roblox (NYSE:RBLX), and its $100 billion valuation immediately puts it ahead of a majority of the companies in the S&P 500. Should you buy Coinbase stock on its first day of trading? It is expected to have the initial first-day surge, but usually waiting for a quarter or two to see how the stock performs is a good way to play IPOs and direct listings. Besides, what if Bitcoin were to crash on Thursday? Since Coinbase will be so heavily tied to the performance of cryptocurrencies, investors may want to wait out the frothiness of the current bull run.
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