Bitcoin recently hit the $50k milestone. If that feels pricey, how about a share of the largest US cryptocurrency exchange?
Presenting Coinbase (ticker: COIN). The company has been valued at $100B+ in private secondary trading, which would make its direct listing the largest tech debut since Facebook.
For comparison, its last funding round (2018) valued it at a slightly lower number… $8B.
The business of Coinbase
According to Coinbase’s S-1, the current financial system is an inefficient and costly patchwork of intermediaries. There’s a need for a new, digitally native financial system — AKA the crypto economy.
Coinbase has built an end-to-end infrastructure to enable a safe and user-friendly platform to buy, store, and use crypto assets:
- Cryptocurrency exchanges: There’s a regular and a pro version for more sophisticated investors.
- Wallet service: Where customers can safely store their cryptocurrencies.
- Coinbase commerce: Online retailers can use this software to accept cryptocurrency. Think Paypal, but for crypto.
- Coinbase card: A physical debit card allowing people to spend cryptocurrency in the physical word
Why the potential $100B valuation?
Coinbase is one of the largest global cryptocurrency exchanges. Its strengths include:
- Flywheel effects: As more products develop and more consumers join the platform, more retail users, institutions, and other partners (developers, merchants, etc.) will come to the site.
- Huge industry growth: The market cap of crypto assets went from $500m in 2012 to $782B by 2020 — 150% growth per year.
- Rapid revenue increase: Coinbase more than doubled its revenue in 2020 to ~$1.3B. There are 43m retail users, mostly from word-of-mouth marketing.
- Steady profitability: Unlike many high growth tech companies, Coinbase has been largely profitable in recent years — ending 2020 with $322m in net income.
A watershed moment for crypto at large
Beyond a lucrative exit for founder Brian Armstrong (who already made a cool $60m in 2020 alone), a strong IPO would be a large step for legitimizing the crypto.
Critics view the industry as risky and experimental at best, lawless and illicit at worst. Even tech behemoths like Square and Tesla are just starting to buy Bitcoin.
Successful or not, Coinbase’s IPO is going to make history. No pressure, mate.
(Read our full Coinbase breakdown here)
