|
A digital currency trading platform successfully went public on a traditional stock exchange through an IPO. The "first digital currency exchange" that was born successfully set off a crypto boom and was called a milestone in the cryptocurrency industry by industry insiders. Coinbase has already gone down in history. However, Coinbase's vision goes far beyond that.
The birth of the first digital currency exchange
On April 14, 2021, Coinbase Global, a major cryptocurrency trading platform in the United States, was officially listed on the Nasdaq exchange. Data showed that Coinbase opened up about 52% on its first day of listing, with an opening price of $381. The company went public directly with a reference price of $250 per share. Coinbase's trading volume on the first day of listing exceeded $10 billion, with a turnover rate of 24%, and once rose by more than 70% during the trading session. Coinbase CEO Brian Armstrong said that Coinbase's direct listing on Nasdaq is a turning point for the entire cryptocurrency industry. After Coinbase went public, Armstrong said in a discussion on the Clubhouse app that banks used to hang up on Coinbase, and many people looked down on the digital currency exchange. Now, executives from the banks that helped Coinbase go public have called to ask how they can get deeper into the crypto space. (Coinbase executive research)
“This seems to be a shift in legitimacy not just for Coinbase but for the entire industry,” Armstrong said. “Crypto is poised to become a major force in the financial world.”
It is worth mentioning that on the first day of Coinbase’s listing, Ark Invest founder and CEO Cathie Wood bought nearly $250 million worth of Coinbase shares.
Over the past decade, blockchain digital assets such as Bitcoin have gradually gathered more and more consensus around the world. In particular, the price of Bitcoin has hit new highs after several rounds of bull-bear transitions, and its value has been recognized by more and more institutions. Coinbase's listing also shows that the scale of this industry is expanding and the growth rate is accelerating. Industry analysts said that Coinbase's successful listing is based on the sharp increase in its operating income and profits due to the sharp rise in cryptocurrency prices, and on the other hand, it also reflects the market and regulators' acceptance and recognition of it. Against the backdrop of the continued warming of the global cryptocurrency market, actively embracing regulation and improving security has become Coinbase's choice to be the first to complete its global listing.
Coinbase Global, Inc. pointed out in its introduction that it wants to power the crypto economy. They are building the crypto economy - a more fair, accessible, efficient and transparent financial system.
After the listing of the continuously developing crypto economy, Coinbase has been advancing rapidly and expanding its business. In May, Coinbase Wallet launched a new browser extension that allows users to connect to Uniswap, SushiSwap and other DeFi applications. In the same month, Coinbase launched its own media business.
Then came the crypto crash in May, with investment firm Mizuho saying the sharp drop in the price of Bitcoin and other cryptocurrencies increased the risk of a "crypto winter" that could drag down Coinbase. The firm cut its price target on its stock, which has been listed for less than two months, from $315 per share to $225, saying the sharp drop in cryptocurrencies has created a significant downside outlook.
However, JPMorgan analyst Kenneth Worthington, who has an “overweight” rating on the stock, said that despite recent volatility, the outlook for Coinbase and the crypto space remains bright.
In the same month, Coinbase CFO Alesia Haas said, "I think people who are new to this space may underestimate the volatility of this market. But cryptocurrencies are volatile, and we have to remember that this is a very young industry and a very emerging asset class. Although there has been a lot of volatility recently, we have been dealing with such situations since very early on."
In addition, Coinbase said that data as of early May showed that the platform's second-quarter performance may exceed that of the first quarter, and that second-quarter trading volume is expected to reach or slightly exceed first-quarter levels.
In June, Coinbase announced a partnership with the Future Institute at the University of Nicosia in Cyprus to provide a scholarship program for minority professionals. By offering fully funded scholarships to minority professionals to obtain a master’s degree in blockchain and digital currency, Coinbase will help train the next generation of leaders in the cryptocurrency industry.
In addition, Coinbase has also partnered with ForUsAll Inc, a U.S. pension plan 401k service provider, to provide cryptocurrency investment options. Coinbase will provide guarantees and management for employees' crypto assets.
In terms of compliance, Coinbase has also obtained approval from Germany for its cryptocurrency custody business. Coinbase CEO Brian Armstrong said that we plan to list all legal and feasible cryptocurrency assets.
In July, Coinbase CEO Brian Armstrong published a blog post revealing the pillars of its strategy.
They are: 1. Crypto investment remains Coinbase's core business, and Coinbase will continue to focus on adding new assets, institutional infrastructure, and international expansion; 2. Coinbase will provide financial services supported by modern crypto infrastructure, including DeFi, payments, income and lending; 3. Coinbase is promoting new innovations and products beyond financial use cases, and will invest deeply in third-party products in the crypto economy, including presenting applications, externalizing shared services, and investing in the crypto economy.
Coinbase's strategic arrangements are also reflected in the cumulative quarterly report. As of June 30, 2021, Coinbase's cumulative revenue was US$4.02 billion, a revenue growth of 968.69%. Among them, transaction revenue accounted for 86.15%, subscription and service revenue accounted for 3.05%, and other revenue accounted for 9.91%.
(Cumulative quarterly report) (Income breakdown)
Is there a risk of a crypto winter?
With the rapid growth of its performance, many institutions are optimistic about Coinbase. Recently, Intel's institutional investment manager submitted a quarterly report to the US Securities and Exchange Commission, showing that Intel bought 3,014 shares of Coinbase for $763,000. In addition, the latest quarterly report of Tiger Global Management, LLC, a well-known US investment company, shows that as of June 30, the company held a total of 2.625 million shares of Coinbase Global Inc Class A, worth more than $670 million.
(Shareholding Institutions)
In addition, many institutions have disclosed their 13F quarterly holdings reports. ARK, BlackRock, JPMorgan Chase, Deutsche Bank and other institutions established positions in Coinbase in the second quarter. (According to the regulations of the US Securities and Exchange Commission: institutions with stock assets exceeding US$100 million are required to submit a stock holding report at the end of each quarter, i.e. 13F, to the SEC within 45 days after the end of each quarter.)
With continued profitability, Coinbase is also increasing its investment. Its founder Brian Armstrong also revealed his desire for Coinbase to become the "Amazon of assets." According to data from market research firm CB Insights, Coinbase Ventures, the venture capital arm of Coinbase, completed 37 transactions in the first half of the year, nearly double the number of transactions in the whole of last year, ranking third among corporate venture capital funds, second only to Google (64) and Salesforce (59). Coinbase Ventures has invested in startups such as Vega Protocol, which builds a decentralized derivatives trading network, Casa, a Bitcoin self-custody company, and Fractal, a trading company. Corporate venture capital refers to the direct investment of corporate funds in external startups. Since many companies are well-funded, they are more likely to reach large transactions.
In addition, overseas expansion is also continuing. On August 19, Coinbase announced a partnership with Mitsubishi UFJ Financial Group (MUFG) to launch the Japanese Coinbase platform. The platform aims to comply with local regulations and become one of the easiest-to-use crypto trading platforms. Mitsubishi UFJ Financial Group is one of the largest banks in Japan, serving 40 million Japanese customers. Coinbase will first launch products suitable for retail investors, including the top five assets with the highest trading volume, and will add more assets and products in the coming months. Coinbase also plans to launch more localized services around the world in the future, such as advanced trading, institutional Coinbase, etc.
However, there are hidden concerns behind the impressive performance. Earlier, Mizuho said in a report to clients that "winter" could deal a major blow to Coinbase's business. "Winter" refers to a period of time when the prices of Bitcoin and other digital currencies stagnate at low levels after a sharp drop. In fact, the decline in digital asset prices that began in late 2017 is an example of a cryptocurrency winter.
In addition, on August 11, Coinbase released its financial report on Tuesday, with revenue exceeding analysts' expectations, but an American investment research company still believes that the market value of the largest cryptocurrency exchange in the United States is obviously overestimated. David Trainer, CEO of Nashville-based company New Constructs, said that although Coinbase's financial report is impressive, it is not enough to justify the company's valuation of approximately US$56 billion.
David Trainer said that Coinbase may not be able to maintain future blowout earnings due to increasing competition in the cryptocurrency trading field. Therefore, New Constructs expects that the exchange's profit margins and future revenue growth rates will decline with competition from companies such as Binance, Gemini and Kraken.
At the same time, for Coinbase, which dominates trading revenue, the decline in trading users is also a major concern. According to Coinbase's second quarter 2021 financial report, trading revenue in the second quarter reached US$1.93 billion, but Coinbase expects that the trading volume in the third quarter will be lower than that in the second quarter, and the monthly trading users (MTU) will also decline. The MTU in July was 6.3 million, and the trading volume was US$57 billion.
In addition, Bank of America included Coinbase's stock COIN in its analysis. The bank's analyst Jason Kupferberg first gave it a "neutral" rating and set a target price of $273, saying: "COIN's goal is to become the Amazon of crypto assets, but in our view, COIN's model is still in a very early stage, and we are still waiting for more specific progress that echoes this long-term vision." Kupferberg said Coinbase is expected to promote business diversification and get rid of its dependence on crypto transaction fees, which account for 95% of its revenue. He pointed out that services such as staking and lending are beginning to be favored by exchanges, and paid membership services provide important cross-selling opportunities, which will help increase Coinbase's average user spending.
Obviously, Coinbase is also well aware of its own limitations. The latest data shows that Coinbase has accumulated $4.36 billion in cash reserves by the end of June, far higher than the $1.1 billion at the end of last year. This move is aimed at ensuring that the company can continue to grow in the face of potential business risks such as regulatory crackdowns, cyber attacks and declining trading volumes. Coinbase Chief Financial Officer Alesia Haas said that we hope to maintain these cash reserves so that we can continue to invest and continue to develop our products and services when the crypto bear market comes.
Like the crypto market, Coinbase also has a long way to go. (Golden Finance)
|
