25.10.2021

The largest cryptocurrency exchange Coinbase goes to IPO

Last week, the largest US cryptocurrency exchange Coinbase announced plans to go public. The company has filed an S-1 IPO with the US Securities and Exchange Commission (SEC), and the event was posted on the official Coinbase blog.

It is worth noting that this is the first cryptocurrency marketplace to pursue a plan of this magnitude. In this regard, the representatives of the cryptocurrency community have a logical question about what consequences the leadership’s initiative can cause.

Let us remind you that an IPO is the start of the issue of your own securities on the stock exchange. In this way, they attract a huge flow of investments for explosive business development. With an IPO, a company turns from a private organization into a public one, that is, any interested trader will be able to acquire part of its assets. The main reason for going to an IPO is the desire to attract more money, “declare yourself to the world” and stake out the reputation of a “solid” company.

This initiative looks interesting, since such solutions are very rare for representatives of businesses related to cryptocurrencies. Earlier, the manufacturers of ASIC miners required for the production of cryptocurrencies went to the IPO.

Coinbase IPO: how will it turn out for the cryptocurrency industry?

According to Uriel Ohayon, CEO of crypto wallet ZenGo, Coinbase’s IPO could “set the standard” for the entire digital asset space. In such conditions, it is rather difficult to overestimate the results of the initial public offering of the company’s shares. Moreover, her initiative will spur the development of the industry. Here is a quote from an analyst.

This is a whole milestone for the industry and a new stage in its economic recognition. This fact alone confirms that the industry is gaining momentum and attracting the attention of solid players. Cryptocurrencies are no longer just a speculative game started by passionate technology fans in the garage.

Coinbase IPO Will Make Crypto More Attractive to Institutions

Coinbase is not only an exchange, but a suite of related products for both casual and institutional investors. An IPO could enable all of them to invest in crypto “without having to buy the cryptocurrencies themselves,” Ohayon said. The expert continues.

Indeed, anyone who can buy shares will be able to own the market leader’s stake in the crypto industry as an advantage to the new economy.

Recall that the desire to go to the IPO has been discussed in the Coinbase management since at least 2018. Then the operating director of the company Asiff Khirji indirectly confirmed the rumors about the initial public offering in one of his interviews.

According to SEC rules, a company’s Form S-1 must disclose basic information about its assets, management information and details of financial statements. In addition, Coinbase is being evaluated by independent accountants. Analysts at analyst firm Messari have so far estimated the potential capitalization of Coinbase after the IPO at around $ 28 billion.

This figure was sounded based on four main indicators:

  • data on previous rounds of funding;
  • the amount of funds of 35 million clients of the exchange;
  • the growth rate of the number of clients served;
  • the average daily volume of traders on Coinbase.
Coinbase Capitalization Tweet from Messari Representative

Given the growing interest in crypto from institutions, Coinbase is sure to receive huge investments from traditional investors after its IPO. However, the upcoming IPO has its risks, Ohayon said in an interview with the news outlet Decrypt.

What I’m talking about is that since they are now going to be a public entity for Coinbase, disclosing the company’s information will add to the need not only for regulatory compliance, but also for risk balance. This will make the company more “conservative”. For example, it will have more restrictions on playing with non-custodial services and high-risk assets.

Of course, all of the above will be true if Coinbase successfully completes its IPO and does not suffer the same fate as Bitmain. Recall that a couple of years ago, the largest manufacturer of ASICs for Bitcoin mining was also going to become a public company, but the leadership’s initiative then failed.

We believe Coinbase’s IPO is more than just a way to raise funding and raise more funds. Thus, the largest cryptocurrency exchange will announce the cryptocurrency industry and prove that representatives of the latter can bring income, including to fans of conventional investments. In addition, the presence of the company’s shares on ordinary exchanges will improve the reputation of the niche and will certainly become an excuse for someone to invest money in the cryptocurrencies themselves.

In any case, the coming year will be eventful for the cryptocurrency industry.

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