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April 14, 2021updated 19 Jan 2022 7:34am

Coinbase public offering will take place in a volatile market

By MarketLine

Coinbase, the biggest cryptocurrency company, will be listed on Nasdaq, potentially raising Bitcoin’s value even further. The company makes money by operating the largest US cryptocurrency exchange, holding funds for 56m retail customers. As demand for cryptocurrencies rises with primary driving force being Bitcoin, transactions rise as well, inflating the cryptocurrency’s value, making Coinbase more profit.

Thus, by going public, the cryptocurrency company will not only profit from Bitcoin’s inflated price, but it will boost the cryptocurrency’s value even further, by being the largest crypto company to launch a direct public offering (DPO).

However, due to high volatility levels that surround Bitcoin prices, it is very likely for Coinbase shares to experience some level of volatility as well. Coinbase’s DPO is an alternative for initial public offering (IPO), producing usually modest price changes on the first day of trading. Due to the positive correlation between Bitcoin’s price and Coinbase, it is very likely that the Coinbase share price will follow a similar upward pattern, with high volatility levels.

Expected $74bn market capitalization will make the company the largest on the US stock exchange

Coinbase is expected to have a $74bn market capitalization, making it even more valuable than the number one exchange in the US, the parent company of the New York Stock Exchange. This means, a cryptocurrency company, which has been operating for about 9 years, will surpass a stock exchange that has been around for 204 years.

This kind of valuation will have high returns for the existing shareholders and founders of Coinbase, making the latter multibillionaires. However, the biggest challenge the company currently faces is that few people know how value the company, which could have a big impact on Coinbase’s market capitalization.

On the other hand, Coinbase has a solid revenue stream by charging its customers more than 50 basis points per transaction. Thus, as long as there are traders willing to buy and sell cryptocurrencies, taking into consideration the best way to safeguard their assets, Coinbase is the number one destination for them.

This has created a concrete brand image for the company, increasing its client base and boosting the probabilities of Coinbase getting closer to a $74bn market capitalization.

Coinbase profitability outweighs its dark past

Coinbase has faced its fair share of regulatory issues, which could affect the company’s share price. However, even if that is the case, it will not be enough to offset the company’s gains, which the investors take into deeply consideration when investing on Coinbase’s DPO.

In the recent cryptocurrency trade boom, Coinbase reported adjusted earning of $1.1bn on revenues of $1.8bn, with transactional fees making up more than 96% of the revenues and dealing with Bitcoin accounting for 44%. This makes the company a highly profitable one, overshadowing its past regulatory issues.

In the short-run, Coinbase’s DPO will be a success; however, due to the ongoing volatility of the cryptocurrency market and competition from other cryptocurrency exchange platforms, Coinbase’s share price will fluctuate greatly in the future.

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