LONDON (Reuters) -Coinbase Global Inc, the largest cryptocurrency exchange in the United States, will appear on the Nasdaq on Wednesday, marking a milestone in the journey of virtual currencies from niche technology to core assets.
The listing is the largest so far in the cryptocurrency company, with the San Francisco-based company saying last month that private market transactions have valued the company at about $ 68 billion this year, up from $ 5.8 billion in September.
This is the latest breakthrough in the adoption of cryptocurrencies, an asset class that was avoided by core finance only a few years ago, according to interviews with investors, analysts and managers.
“The list is important because it marks the growth of the industry and its acceptance into the core business,”
Bitcoin, the largest cryptocurrency, hit a record high of $ 63,000 on Tuesday. This year, it has doubled more than large investors, banks from Goldman Sachs to Morgan Stanley and household name companies such as Tesla Inc.
Coinbase’s direct listing – meaning it has not sold any shares before its market debut – is likely to accelerate the process, Reuters interviewees said, raising awareness of digital assets among investors.
“This is a very positive thing about bitcoin in itself, as it proves the bridge that was built from an esoteric, left-wing arena full of cowboys to basic finance,” said Charles Hayter of data firm CryptoCompare.
However, some institutional investors have expressed caution about the long-term outlook for Coinbase and the crypto sector.
Swiss asset manager Unigestion said it was wary of the hype surrounding cryptocurrencies and would not buy shares in Coinbase as a result.
“We think there’s a lot of madness and abundance in everything that looks like a crypto,” said Olivier Marcio, a portfolio manager at Unigestion that controls $ 22.6 billion in assets.
“Hedge funds and retail are likely to be the early birds in these new stocks – likely to buy them quite heavily – which should not be a clear indicator of how they will be in the long run.”
CONSIDERED BY BITCOINS?
Other experts said the risks included exposing Coinbase to a highly volatile asset that is still subject to uneven regulation.
Founded in 2012, Coinbase boasts 56 million users worldwide and approximately $ 223 billion in assets on its platform, representing an 11.3% market share of crypto assets, according to regulatory documents.
The latest financial results of the company emphasize how revenues have grown in the final step with the increase in volumes and prices of bitcoin trading.
In the first quarter of the year, as bitcoins doubled in price, Coinbase estimated revenue of more than $ 1.8 billion and a net profit of between $ 730 million and $ 800 million, compared to $ 1.3 billion for 2020.
“The correlation with bitcoins will be very high once stocks stabilize after listing,” said Larry Chermak, director of research at the crypto website The Block.
“When the price of bitcoins falls, it’s inevitable that Coinbase’s earnings and, in essence, stock prices will fall.”
Regulatory risks are also emerging, others said, as Coinbase increases the number of digital assets that consumers can trade on its platform.
Last year, Coinbase halted trading in the major digital currency XRP after U.S. regulators charged a related blockchain company, Ripple, with an offer for $ 1.3 billion worth of unregistered securities. Ripple denied the allegations.
“Given the expansion of the assets covered by Coinbase, it is almost inevitable that other listings will be called into question,” said Colin Platt, chief operating officer of the crypto platform Unifty.
Coinbase declined to comment.
Report by Tom Wilson and Anna Irera Edited by Nick Zieminski