Cryptocurrency exchange Coinbase is due to go public today, marking the growing acceptance of cryptocurrency use around the world.
The San Francisco-based company is due to list on the NASDAQ on 14 April local time with 114,850,769 shares. It will have an initial valuation of US$100 billion (AU$130 billion), making it the largest listed company in the cryptocurrency sector.
And cryptocurrency investors are excited: Bitcoin has leaped to a record high - up 5.5 per cent this week to US$63,348 (AU$82,745).
"The Coinbase IPO is significant for a few reasons. Firstly, it reflects the institutionalisation and development of the crypto industry,” Ben Laidler, eToro's global market strategist told Yahoo Finance.
Morgan Stanley and Goldman Sachs have also announced plans to allow their clients to invest in cryptocurrency, while Tesla has also made a major US$1.5 billion investment in Bitcoin and is now accepting it as payment for its vehicles.
The other message behind Coinbase’s listing is a reflection of changing public markets, Laidler said.
Coinbase’s decision to list directly means that rather than using underwriters to create new shares to be sold to the public, only existing shares will be sold, without needing underwriters’ involvement.
The third effect of the listing is that it allows investors exposure to cryptocurrency without needing to invest in the often volatile assets themselves, Laidler said.
“The stock can be included in pension funds and trackers that previously could not directly include cryptoassets, thereby further opening up the crypto market to an entirely new pool of capital."
Coinbase’s entry to the stock exchange under the COIN ticker, will effectively begin the first partnership between cryptocurrency and the legacy finance world, senior analyst at Swissquote Ipek Ozkardeskaya added in a note.
“As such, a successful addition to Nasdaq should act as endorsement of cryptocurrencies by traditional investors.”
Founded in 2012, Coinbase’s mission has been to make investing and using cryptocurrencies easier. It’s since become the largest cryptocurrency exchange in America with preliminary first quarter revenue in 2021 a staggering US$1.8 billion.
Its business success has largely mirrored the rise in Bitcoin and Ethereum values, which have both grown more than 800 per cent and 1,300 per cent respectively in the last 12 months.
Coinbase takes a slice of every Bitcoin transaction on its platform, allowing it to achieve those revenue figures.
However, there are concerns that Coinbase’s listing is overvalued.
“Coinbase’s fate is obviously tied to the performance and uptake of bitcoin and other cryptocurrencies. If investors lose interest in cryptocurrencies, Coinbase’s business will be in trouble,” associate professor of finance at the University of Reading’s Henley Business School .
“Coinbase also has to contend with competitors arriving every day, many of whom become big very quickly. Binance, the market leader with US$39 billion in daily volumes, only launched in 2017 for example.”
He said Coinbase’s success will depend on its ability to innovate and maintain its market dominance.
“If you are interested in investing in cryptocurrencies, you are probably still better off investing in the digital coins themselves as their performance depends only on the level of demand for them.”
And if investors do choose to invest, they’ve been warned to prepare for volatility - at least during the first week following the listing.
“I expect to see a lot of volatility next week once COIN begins trading, but eventually I think we’ll see it trade more in line with the direction of the broader crypto market”.
How to buy Coinbase shares from Australia
While Coinbase is listing on an American stock exchange, there are ways for Australian investors to gain exposure.
To buy shares, you'll need to go through a broker with global access. eToro and IG Markets both have access to US markets.
Then, you'll need to open an account, confirm payment details and you can buy the COIN shares.