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Coinbase Beats Crypto-Friendly Intercontinental Exchange In Wall Street Debut

Yerevan (CoinChapter.com) — Coinbase Global Inc. delivered an $86 billion valuation in its trading debut on Wall Street, beating bigger and older exchanges like Intercontinental Exchange (Ticker: ICE) in terms of market capitalization.

Coinbase’s shares (Ticker: COIN) opened at $381 and rallied towards an intraday high of $428.94 in the first few minutes of the New York session. Nevertheless, the stock ended the session at $328.28, down 14.52 percent. However, COIN’s bid was still higher than Nasdaq’s reference price of $250 issued on Tuesday.

Minute-by-Minute Coinbase stock performance on Wednesday debut. Source: COIN on TradingView.com
Minute-by-Minute Coinbase stock performance on Wednesday debut. Source: COIN on TradingView.com

Barron’s reported that Coinbase IPO “lived up to its hype.” Meanwhile, the Wall Street Journal called it “one of the largest tech debuts ever, based on market capitalization.” The Financial Times called it a “coming-of-age moment” for cryptocurrency markets, on the whole, noting that the IPO made Coinbase one of the top 150 richest public companies in the US.

Coinbase Record to Date

At its core, Coinbase is a cryptocurrency trading service that allows clients to sell, purchase, transfer, and store Bitcoin, Ethereum, and 50 other digital assets. The San Francisco-based firm estimated that it earned about $730-800 million in the first 2021 quarter alone, more than double what it made throughout 2020.

The growth has tracked a bullish Bitcoin performance. The benchmark cryptocurrency, which has earned its share of criticism for allegedly simplifying money laundering and terrorist financing, emerged as more than a tool for criminals in 2020. Investors flocked their capital into its market against their fears of inflation, spurred higher by Federal Reserve’s ultra-loose monetary policies and rising national debt in the US. Bitcoin appealed to investors with its gold-like safe-haven capabilities, which includes a provable limited supply cap of 21 million tokens.

Coinbase profits jumped due to this sudden retail and institutional interest in Bitcoin and its rival cryptocurrencies.

For instance, the second-largest cryptocurrency Ethereum returned more realized profits to its investors than Bitcoin did, partially because of the key role in backing the 2020’s most successful sector: the decentralized finance (DeFi).

Coinbase features more than 13 DeFi tokens on its trading platform. Its revenue also jumped due to the mania surrounding these projects, with some of them even returning more than 3,000 percent year-on-year profits for their investors.

But…

…to some analysts, the crypto-mania is exactly where the Coinbase stock starts appearing risky. David Trainer, chief executive of investment-research firm New Constructs, warns that while Coinbase is a good company, its stock is not good anywhere near the current levels.

“The pricing is a function of investor sentiment and is not related to the underlying economics of the business or the basic laws of competition,” he told the Wall Street Journal.

The worrisome outlook appeared out of Coinbase’s performance in 2019. The company reported that it lost $31 million, with its chief executive Brian Armstrong warning that there might be periods when Coinbase does not even make any money. Its poor earnings followed a massive decline across all the cryptocurrency assets in 2018. Bitcoin crashed by more than 80 percent that year.

Bitcoin performance throughout its lifetime. Source: BTCUSD on TradingView.com
Bitcoin performance throughout its lifetime. Source: BTCUSD on TradingView.com

Therefore, Coinbase stock now appears more like a benchmark to speculate on the performance of the entire crypto bazaar. Elad Gill, one of the earlier investors in the company, thinks so.

“I view them as a really great index of crypto,” he noted.

Nonetheless, Coinbase now ranks among the leading exchanges in the US based on speculative valuation alone. Its capitalization briefly touched $100 billion at one point in time on Wednesday.

Photo by lo lo on Unsplash

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Yashu Gola

Yashu Gola is a Mumbai-based finance journalist. He is profoundly active in the bitcoin space since 2014 – and has contributed to several cryptocurrency media outlets, including CoinChapter, NewsBTC, FxDailyReport, Bitcoinist, and CCN. Academically, Yashu holds a bachelor's in information technology, with majors in data structures and C++ programming language. He has also won the 'Atulya Award' for his efforts towards raising $100,000 for an India-based farming project.

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