Coinbase stock is coming soon! As of February 2021, Coinbase IPO paperwork was filed. As a result, we’ll see Coinbase being traded on the market just like Bitcoin and other cryptocurrencies. Just because you can buy Coinbase doesn’t mean you should at its inception. In fact, waiting can help you make an informed decision on the direction a stock is going to go when it becomes public.
Chart by TradingView.
Coinbase is the largest cryptocurrency exchange in the United States with over 43 million investors scattered across more than 100 countries around the world. In case you haven’t heard yet, cryptocurrencies were the hottest investment in 2020. And that momentum has carried over into 2021. With COVID-19 causing volatility that continues to affect the markets, investors have looked to the crypto exchanges for a different vehicle to invest in.
Enter Coinbase; a San Francisco based company that was founded by a former Airbnb engineer and a former trader who worked for Goldman Sachs. The two set out to create an easier way for investors to buy and sell cryptocurrencies on an open exchange. They came up with Coinbase back in June of 2012.
Today, Coinbase is one of the main crypto exchanges in the world and reported annual revenue in 2020 of just under $1.3 billion. Yeah, that’s some major cash. The exchange also announced that it saw $193 billion worth of transactions; which represents a 141% year over year increase.
Cryptos are booming and Coinbase is along for the ride. Which is why we’re seeing a Coinbase IPO soon that’ll being about Coinbase stock to trade.
What Are Cryptocurrencies?
Hey, we get it, not everyone is into cryptocurrencies. They’re often seen as volatile and trivial, and maybe they are. But the true value behind cryptocurrencies is in the technology they use; the Blockchain.
Now we’re sure you have heard of the Blockchain before, but for most people, it’s such a vague concept that they’ve never really put the effort into learning what it is.
When you know and understand what the Blockchain is, you’ll quickly realize why cryptocurrencies are so sought after. Blockchain is essentially a digital ledger or record that’s able to keep track and legitimize transactions using cryptography.
Once a transaction has taken place on the Blockchain, it cannot be altered. And it’s stored in that particular block or hash, forever. If one block is altered, the rest of the chain is too. Which makes it easy to see if there was ever an error or suspicious activity.
Originally the Blockchain was created as a ledger for Bitcoin. Its true creator or creators used the name Satoshi Nakamoto as a pseudonym. The true inventors and identity of Satoshi Nakamoto have yet to be confirmed.
Cryptocurrencies are digital currencies that use the Blockchain technology to keep track of transactions, and are known as fungible assets. Blockchain is also used for NFTs or Non-Fungible Tokens, which are unique; unlike cryptocurrencies which can be traded back and forth but are not identical, despite holding the same value. Popular examples of NFTs now are NBA Top Shots, digital art, and even virtual real estate.
Currently, the largest cryptocurrencies by market cap are:
- Bitcoin
- Ethereum
- Cardano
- Tether
- Binance Coin
- Polkadot
- XRP
- Litecoin
- Chainlink
- Stellar
Is Coinbase Publicly Traded?
Traded under $COIN. In fact, word on the internet already has Coinbase as the hottest new stock of the year. Even though it has had a rocky start, with major market makers shorting stock shares the first week of trading, the stock is one to watch in 2021.
$COIN was valued over 100 billion at the time of the IPO but the stock is currently trading in the 260s. Still, this makes Coinbase already more valuable than several other prominent stock exchanges. Including the NASDAQ, the NYSE parent company Intercontinental Exchange (NYSE: $ICE), the CBOE, and the CME. Is that justified? Only time will tell.
Who Is the Coinbase Stock Competition?
With how prominent cryptocurrencies have become in the investing world, it should come as no surprise that the Coinbase IPO will have a ton of competition. In fact, while Coinbase is the largest and most well-known crypto exchange in the United States, it’s far from the largest exchange in the world. Let’s take a look at a few crypto exchanges that are competing with Coinbase.
Binance: The largest crypto exchange in the world by trading volume was founded back in 2017 by Fusion Systems founder Changpeng Zhao; a Chinese-Canadian software developer. In terms of operations, Binance is a highly unregulated exchange that operates out of Malta. Previous headquarters were in China, Japan, and Taiwan. Binance currently has over 100 million users from around the world and has been making headlines as CEO Changpeng Zhao has been mired in allegations of fraud.
Huobi: Huobi is a crypto exchange based out of China and is a publicly traded company on the Hong Kong stock exchange since 2018. They’re the second largest crypto exchange by trading volume and were founded by Leon Li; a former Oracle computer engineer. Huobi suffered a major blow when China put a ban on cryptocurrencies and crypto exchanges back in 2017. But it does still operate in many countries around the world.
Kraken: Kraken is another popular American crypto exchange based out of San Francisco. It’s the fourth largest crypto exchange after Binance, Huobi, and Coinbase. It actually offers 60 different cryptocurrencies to invest in which is more than the 46 offered by Coinbase Pro. Kraken was founded back in 2011 as a replacement for an older exchange called Mt. Gox which closed after a security breach.
Coinbase Stock vs Square
Square (NYSE: SQ): Yes, that Square. The fintech disruptor run by Twitter CEO Jack Dorsey recently made a highly publicized leap into the cryptocurrency by allowing users of its Cash App to buy, sell, and use Bitcoin as a form of currency.
Square also bought several hundred million dollars worth of Bitcoin as a business investment over the past few months. And Dorsey is a known fan of cryptocurrencies and believes in their long-term viability as a legitimate currency.
So it’ll be interesting to see how a Coinbase IPO helps or hinders Square in the coming months. You can trade on the Square app as well as run a business from it. So it’s multidimensional.
So Is Coinbase Stock Worth the Valuation?
That still remains to be seen. As long as cryptocurrencies continue to be popular, exchanges such as Coinbase will continue to thrive. Coinbase isn’t exactly tied to the value of cryptos. Because it makes most of its revenues on transaction charges although it does also “make money” on holding cryptocurrencies like Bitcoin in its accounts.
For as many crypto enthusiasts there are out there in the investing world there are just as many, if not more, skeptics. Could crypto be a fad? Maybe, but it has attracted enough retail and institutional investors to ensure that companies like Coinbase will be relevant for the long term.
If you believe in financials, then Coinbase is an intriguing investment. For such a young company in the fintech space, Coinbase is already profitable; turning in a profit of $322 million during the crypto boom of 2020. Profit margins are estimated to be already around 20%.
In fact, year over year revenue growth is surging at an impressive 140% rate. With a $100 billion valuation, Coinbase would debut on Wall Street trading at between 50 and 100 times previous year sales. But such is the environment we’re in where high growth, unprofitable tech stocks are trading at sky-high multiples.
Remember though, Coinbase is already profitable. Unless you can see the crypto craze fading away in the near future, its profitability should continue to increase year over year. None the less, $COIN is being heavily shorted by traders using intraday short selling strategies.
Conclusion
Cryptocurrencies represent the perfect confluence of high-pace, tech driven investing that the internet generation has become so fond of. Bitcoin has already provided exponential, life-changing growth over the past few years.
They recently became the first cryptocurrency to hit a market cap of $1 trillion. Considering only companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOGL), have a valuation of $1 trillion, it’s impressive to say the least.
The supporters are rapidly starting to overtake the skeptics as massive corporations like Tesla (NASDAQ: TSLA), Square (NYSE: SQ), PayPal (NASDAQ: PYPL), Mastercard (NYSE: MA), and even Bank of New York Mellon (NYSE: BK) have all bought stakes in Bitcoin during the recent bull run. You can be sure more companies will be joining this list sooner rather than later, as firms look for diversified investment vehicles.
This all spells good news for a Coinbase IPO moving forward. This is going to be an expensive one for retail investors, a little akin to the IPOs of tech giants Airbnb (NASDAQ: ABNB) and Snowflake (NYSE: SNOW). But long term, Coinbase stock could be one of the largest recipients of the continued popularity of cryptocurrencies. the bottom line is, always follow the charts, is it bullish vs bearish. That is the number one thing a trader needs to know before they enter the trade!
