On the eve of the largest American cryptocurrency exchange Coinbase filed with the US Securities and Exchange Commission (SEC) a completed form S-1 – a document required to register companies that want to go public.
Recall that Coinbase is going to conduct an initial public offering (IPO) on the stock exchange, which will be a big step forward in terms of attracting new investment in the company and improving the reputation of cryptocurrencies in general. In general, the data from the S-1 form reveals several interesting features of Coinbase’s financial health and information about the firm’s earnings during the current bullish cycle of the crypto market.
First, an explanation. Coinbase is one of the most popular cryptocurrency exchanges in the world and is in high demand among US residents. The plans of the management to bring the company to an IPO – that is, to conduct an initial public offering and start trading them on ordinary stock exchanges – became known in December 2020. The industry has welcomed the initiative warmly, as this practice will significantly improve the reputation of cryptocurrencies.
Most importantly, trading in Conibase shares will allow those investors who do not understand the details of the blockchain, but want to join the current stage of market growth, to indirectly invest in cryptocurrency. According to analysts, there are enough of those willing.
What is Coinbase investing in?
Coinbase’s balance sheet posted a profit of $ 322 million for 2020 – a dramatic change in fortune from the previous year, when the cryptocurrency exchange ended 2019 with a loss of $ 30 million. Much of the company’s success over the past year has been associated with the cryptocurrency market’s growth phase in 2020, when BTC managed to grow more than 300 percent in just a few months.
For clarity, we present a graph of the Bitcoin exchange rate in 2020. It shows the collapse of markets in March, which occurred due to the panic around the pandemic and the massive closures of countries for quarantine. Note that this affected not only the cryptocurrency industry, but also the stock market.
The previous year was marked by a large influx of investments into the crypto market from large funds and companies. This information is also reflected in Coinbase’s S-1 form in the form of growing trading volumes among both large and individual investors. The volume of transactions of the latter for the fourth quarter of 2020 amounted to $ 32 billion , the same figure for large professional investors over the same period of time reached $ 57 billion.
This means that professionals are really playing a big role in this price rally. Accordingly, the market retains the possibility of a sharp growth similar to 2017, because then the flight of coin rates was provoked by ordinary investors, and not by large companies. This time everything is happening according to a completely different scenario.
Bitcoin volatility amid Coinbase trading volumes
In addition, Coinbase has disclosed its direct investment in cryptocurrencies, Decrypt reports. It turns out the company owns roughly $ 230 million in Bitcoin and $ 53 million in Ethereum. The firm also owns a number of other cryptocurrencies – including the $ 48.9 million USDC stablecoin and $ 34 million worth of other coins .
This puts Coinbase in fourth place on the list of companies that officially invest in the crypto market. The stock exchange was outstripped by MicroStrategy, Tesla and the Galaxy Digital fund from the famous entrepreneur and billionaire Michael Novogratz.
The lion’s share of the digital asset in this ranking belongs to MicroStrategy and Tesla – $ 4.6 and 2.6 billion in BTC, respectively. Galaxy Digital has around $ 134 million in cryptocurrencies.
In other words, over the nearly nine years of its existence, Coinbase has not «managed» to accumulate so many bitcoins – especially when compared to newcomer companies in this field. Considering the fact that at the dawn of Coinbase’s founding in 2012, bitcoins could be bought for less than $ 100 , the exchange missed out on a fairly large amount of potential profit from the long-term growth of the cryptocurrency.
However, the platform makes money in a different way. Just like other trading platforms, they replenish their own stocks of funds at the expense of commissions – they are charged for the execution of each trade order, that is, an order to buy or sell cryptocurrencies. Therefore, it is hardly worth considering this an omission. Especially considering that the exchange may debut at an IPO and thus seriously change the perception of blockchain assets in the eyes of the mass consumer. A successful entry into the stock market will definitely make bitcoins, ethers and other coins more attractive to people unfamiliar with the industry.