Crypto has been having a fantastic week in an already incredible year. In the past week, Bitcoin’s value has continued to soar as it hit the $25,000 mark and continues rising. Against the backdrop of all this, one of the biggest names in digital currency exchange, Coinbase, is going public! The company’s valuations place it at the top of American crypto companies. This means that it could be one of the biggest in the world upon approval from the U.S. Securities and Exchange Commission (SEC). The company confirmed that it had presented a confidential draft registration statement to the commission in a short statement. Still, it didn’t provide any more details on the nitty-gritty of the prospective listing.
Many crypto advocates have been eagerly awaiting Coinbase’s move believing that it’s what’s needed to give the crypto sector all the legitimacy it needs in the eyes of the public and regulators as well. If approved, the company would be the first significant cryptocurrency exchange approved to go public. Although details on the specifics such as the target size and timing haven’t been released yet, crypto enthusiasts remain hopeful.
How it’s going to Work
Crypto such as BTC (Bitcoin) is decentralized and borderless, meaning that no one entity controls how much is in circulation at any given time. Coinbase became the most popular exchange in the US by welcoming enthusiasts and newbies alike to join their team. What’s more, they built a killer app that made trading crypto as easy as trading in the forex or equities markets. Several companies have gone public in the recent past, although not with as much success as the founders and shareholders would like. It follows that the IPO will run into a few issues, both practical and philosophical. They include:
Coinbase is essentially built in a way that in which it can distribute tokens for funds. The company’s co-founder Fred Ehrsam recently said that although this is the model most crypto enthusiasts would prefer, traditional institutional funds should be more lucrative.
Although more lucrative, the traditional underwriting process sometimes does not work out as well. If there was a misreading in retail demand, the company might offer more shares than the market is ready to take on. Recent IPOs by DoorDash and Airbnb were marred with such scenarios forcing those looking forward to their IPOs to rethink their formula. When you add true cryptocurrency believers in the mix, the difficulty level of pulling off the IPO increases. As such, a direct listing of the shares being sold will make more sense from an efficiency and pricing view. However, if the company wants to gain both worlds’ best, new SEC rules say that you can raise money the traditional way.
What Are They Worth?
The last time a valuation was done, Coinbase was valued at around $8 billion in a funding round in 2018. Today, they have grown a lot more. With the surging prices in crypto value and the frenzy for tech stocks, that number has increased exponentially. Coinbase’s C.E.O., Brian Armstrong, regularly blogs on his thoughts regarding the crypto community in general and where he thinks certain altcoins are headed. However, due to the disclosure regulations around public offerings, it’s unlikely that we will hear anything from him, especially on the IPO front. As Bitcoins’ prices continue to soar, everyone is turning their eyes to this new asset class that many pundits have called gold 2.0. However, people must realize that investing in any form of cryptocurrency is not without its risks. If you can stomach the risk, then investing in this asset should work out just fine.
