The debut of Coinbase on Wall Street was the largest financial news on Wednesday, after being listed as a public company on the Nasdaq financial index. The cryptocurrency trading company was created in 2012 in Sillicon Valley by Bryan Amstrong.
Coinbase allows its users to buy and store cryptocurrencies on its platform. The company’s users primarily trade with the purchase of Bitcoin and Ethereum. However, the crypto exchange allows the purchase of a wide range of other cryptocurrencies.
Last week, Coinbase reported that its revenue grew by 847 % during the first quarter of 2021, closing at $1.8 billion. Coinbase’s astronomical revenue growth was due to Bitcoin’s rapid valuation over the past few months. The crypto exchange has a verified user base of 56 million users.
“Coinbase is a critical piece of the crypto ecosystem and is a barometer for the growing overall adoption of bitcoin and cryptos for the next few years, in our view,” wrote Dan Ives, principal at Wedbush Securities, an investment fund specializing in technology.
The cryptocurrency exchange was listed under the COIN ticket, and the company’s initial public offering is $250 per share, but during the day of its IPO the stock traded for as much as $381, 40% above its initial offering price.
The company’s value is estimated to be around $65 billion, although some investors estimate that the company will eventually reach a valuation of $100 billion, surpassing the market valuation of U.S. exchanges such as Nasdaq, ICE, CME Group and CBOE Global Markets.
Despite the optimism of some, there are also many skeptics regarding Coinbase’s valuation; as is the case of David Trainer, CEO of investment research firm New Constructs, who stated that the value of the cryptocurrency platform is too high. “Although Coinbase’s revenue increased over the past 12 months, the company has little to no chance of meeting future earnings expectations built into its ridiculously high expected valuation of $100 billion,” he said.
“Coinbase’s expected valuation of $100 billion implies that its revenues will be 1.5 times the combined 2020 revenues of two of the most established exchanges in the market,” Trainer said referring to NSE exchanges ICE and Nasdaq.
A relevant concern will be the volatility that Coinbase’s share price may present, as its revenue is highly correlated to cryptocurrency market activity. About 90% of Coinbase’s reported revenue depends on trading especially Bitcoin and Ethereum.