The IPO’s success gives mainstream traditional investors, who have been hesitant to buy assets that were not protected in the way centralized ones are, the chance to invest in the future of currencies like Bitcoin without leaving a Securities and Exchange Commission-controlled method of investment.
Last week, the American cryptocurrency exchange platform Coinbase Global, Inc. saw its first day of public trading end with a valuation of nearly US$85.7 billion, closing out at US$328 per share.
Coinbase is the world’s largest crypto exchange platform and is essentially the first company focused entirely on cryptocurrency to go public. Its initial public offering (IPO) was widely seen as a referendum on the validity of cryptocurrencies: a success would indicate that the more traditional market is open to embracing it, while failure would mean that the drawbacks of decentralized finance might be too great to overcome.
But the massive valuation, one that rivals the IPO of Facebook and Airbnb, was more than 10 times higher than the company’s last private valuation and is widely considered a huge success for both Coinbase and the wider cryptocurrency community.
The IPO’s success gives mainstream traditional investors, who have been hesitant to buy assets that were not protected in the way centralized ones are, the chance to invest in the future of currencies like Bitcoin without leaving a Securities and Exchange Commission-controlled method of investment.
It also helps quell investors’ fears over the legitimacy of crypto in the first place, addressing the question of whether or not cryptocurrencies were real at all.
“Any industry that can launch an IPO of this size is without a doubt a real thing, and it’s proven by the market,” said Bradley Tusk, a founder of Tusk Venture Partners, a venture capital investment firm that backed Coinbase.
In addition to its shifted perception in the market, the successful Coinbase IPO paints a picture of how cryptocurrencies are being perceived by the public after seeing a somewhat tarnished history.
Past headlines about things like marketplaces for illegal items had surrounded Bitcoin use in earlier days and stories of crypto exchanges that collapsed after alleged theft and embezzlement served to discredit the emerging industry.
According to polling done in 2020, nearly a third of people still believe that cryptocurrency is primarily used to purchase illegal items. Even more, around 40%, believe that it is primarily used to purchase stocks.
However, owners of cryptocurrency assets say that their most frequent purchases with the currencies are a little less exciting, with the most common things being food and clothing.
And Coinbase’s willingness to comply with regulations that were just starting to appear around the time of its start in 2012 helped further tie the industry as a whole to more centralized forms of regulation.
But that doesn’t mean the future of cryptocurrency is bound to be successful as new challenges are arising with the progress of the industry.
Even though the Coinbase IPO brings some stability to crypto, the entire cryptoeconomy is still highly volatile compared to the relative consistency seen within other major stocks. This volatility, Coinbase warned in its IPO filing, will absolutely affect how Coinbase succeeds.
“All of our sources of revenue are dependent on crypto assets and the broader cryptoeconomy,” it reads. “Due to the highly volatile nature of the cryptoeconomy and the prices of crypto assets, our operating results have, and will continue to, fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader cryptoeconomy.”
The other major challenge facing the industry comes with regulations that are still in their early stages of creation and implementation by federal authorities.
In January, Treasury Secretary Janet Yellen said in a written testimony that she thought close attention needed to be paid to “curtailing [cryptocurrency] use for malign and illegal activities.”
Coinbase also recognized the regulation that will come in the near future.
“We are subject to an extensive and highly-evolving regulatory landscape,” said the filing, “and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.”
The Coinbase IPO was, as The New York Times put it, “a Cryptocurrency Coming-Out Party.”
As companies like Tesla and Square begin to hoard Bitcoin, banks seem more eager than ever to get in on the action.
Just how big cryptocurrency gets remains to be seen, but it’s now clear that crypto is more than just hype.
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