Coinbase IPO on April 14th: Is it worth investing in stocks?


One all-time high chases the next, in stock indices and in the crypto market. In line with the heated market environment, the crypto exchange Coinbase dares the IPO in April. What are the reasons for buying the stock and what are against it.

In order to get to the really big pots of money, more and more crypto companies are flirting with the idea of ​​going public. So does the American crypto exchange Coinbase. On April 14, the company would like to list 114.9 million shares on the New York NASDAQ under the symbol “Coin”. However, this is not about the issue of new shares, but a direct listing in which existing shares are released for public trading.

NFT Mania: Is It Worth Investing?

NFT Between hype and substance

Find out more in the leading magazine for blockchain and digital currencies
(Print and digital)
☑ 1st edition free of charge
☑ Over 70 pages of crypto insights every month
☑ Never miss out on investment opportunities
☑ Free postage to your home

To the crypto compass magazine

In a notice to the US securities regulator, the SEC, Coinbase announced in mid-March that shares changed hands for an average of $ 343.58 in over-the-counter trading. On that basis, it comes to a valuation of $ 67.6 billion. The share price has risen by more than 1,200 percent within a year, even without public listing. After all, the average exchange rate last year was just $ 28.83. But that’s not supposed to be enough. Individual analysts now assume that the crypto exchange could come to a valuation of over 100 billion US dollars on its IPO.

Coinbase: The Apple of the Crypto Economy?

Coinbase will very likely be the first crypto company to be listed in the highest possible stock market segment. At the same time, it has the chance to become one of the biggest IPOs in recent years. AirBnb had one the previous year IPO rating of just over $ 100 billion. The crypto exchange could even crack this rating in the current market environment. The resulting waves should not be underestimated.

On the one hand, the other crypto company should also carry out an IPO. The Kraken crypto exchange, for example, had publicly toyed with the idea. On the other hand, the crypto market gets a representative who represents the entire crypto industry – positively as well as negatively – in the public perception. So when stock market commentators in New York, London or Frankfurt talk about the Bitcoin price, they will often show a stock chart from Coinbase. Conservative investors in particular who shy away from direct investments in tokens should include Coinbase in their portfolio in order to gain exposure to the crypto market.

display

Trade Bitcoin, stocks, gold and ETFs in one app!

Reliable, simple, innovative – trade Germany’s most popular financial instruments easily and securely.

The advantages:
☑ Free 40.0000 EUR demo account
☑ Registration in just a few minutes
☑ PayPal deposit / withdrawal possible
☑ Available 24/7 + mobile trading
To the provider

76.4% of retail investor accounts lose money when trading CFDs with this provider [Anzeige].


These 5 reasons speak for an investment in Coinbase

As exciting as the background to the Coinbase IPO may be, many investors should be interested in one question above all: Is it worth investing in Coinbase shares. Below are five reasons that speak for a Coinbase investment.

1. Coinbase the “Universal Financial Institution”

Not long ago, most cryptocurrency exchanges couldn’t do much more than trade a handful of cryptocurrencies. In the meantime, however, the Exchanges are expanding their product portfolio. Be it debit cards, savings plans, credit services, index tokens, staking etc. The range of other services and thus also pillars of income is still at the very beginning in the crypto sector. Coinbase could thus become much more than an exchange. As a universal financial institution, it has the potential to penetrate all areas of value creation in the financial sector. Assuming that tokens are establishing themselves as the standard medium for securities and fiat money, among other things, the potential for sales and profit is gigantic.

2. No competition in the 1st Bundesliga

In the “1. Bundesliga ”there is no other crypto company. This means that Coinbase benefits greatly from the inflow of funds from the very large funds, pension funds, etc. After all, their policy often only allows investors to invest in stocks in the highest market segment. In the subjective perception of some equity investors, the share with the symbol “Coin” could be assigned the role of a crypto fund or index. This greatly simplified representation could lead to the narrative: “If you want to participate in the crypto market, then buy Coinbase.”

3. The number of users could easily multiply

The market for cryptocurrencies is still far from saturation. The majority of people do not own Bitcoin and Co. As the largest and best-known crypto broker in the USA, Coinbase should continue to benefit enormously from the market growth. If one assumes that cryptocurrencies are increasingly finding their way into the mainstream, then a doubling of the number of users from 56 million in the last two to three years is possible without any problems. In addition, Coinbase is also looking to the European market. Should Coinbase be able to fight for larger market shares in Europe, then the current sales figures should seem downright modest.

4. Coinbase is profitable

You could see it in the rising US yields on US government bonds: Tech companies without positive earnings have been punished. As important as future expectations are on the stock market, it can be very helpful to be in the black in the here and now. Coinbase achieved a profit of 322 million US dollars in 2020. The fact that Coinbase has a business model that both currently works – one cannot say about hyped flight taxi stocks, for example – and still has enormous growth potential, makes it particularly attractive.

5. Turn the big wheel with “Insti-Service”

“Small cattle also make crap”, is an old German saying. For the crypto market, this was particularly true in the heavily private customer-heavy sector. However, most of the money is managed by institutional rather than retail investors. Accordingly, the question arises, where do customers like Tesla or Microstrategy go when they want to purchase and store Bitcoin? At the moment it is mainly Coinbase Pro, the service for large investors, which has grown enormously in importance in recent months. If one assumes that other corporations, family offices, HNWIs, etc. will penetrate the crypto market more strongly, then Coinbase could become the “crypto house bank” of the money nobility.

These 5 reasons speak against investing in Coinbase

1. Euphoric market environment creates euphoric evaluations

The current market is in a very euphoric mood. All-time highs, record volumes on stock exchanges of all kinds and record new registrations with broker accounts have been shooting through the roof for months. The evaluation of Coinbase is correspondingly inflated and over-optimistic. The potential for disappointment is therefore correspondingly large, especially since there is a high level of dependence on the crypto market. If there is an overdue correction or a “summer break” after the rally, as we have had so often in the markets, then the selling pressure on Coinbase shares should be quite high.

2. The competition never sleeps

Other crypto financial service providers are also positioning themselves in the market and doing everything they can to gain market share. For example, Anchorage in the USA should be mentioned, which recently received a banking license and was thus the first official “crypto bank” in the USA to win a milestone. Even in the “battle for Europe”, Binance and Kraken in particular will make it difficult for the American crypto exchange to gain market share. In addition, domestic service providers such as the Stuttgart Stock Exchange can benefit from the trust “Made in Germany”. Furthermore, the big banks like Morgan Stanley or Goldman Sachs are jumping on the crypto train. Their institutional customers in particular will not let them move to Coinbase without a fight.

3. Falling fees put the margin at risk

As innovative as the market in which Coinbase operates, its business model is not. The services offered are basically relatively easy to replace. As important as many customers are, Coinbase cannot benefit from a network effect like Facebook, AirBnb or Google. Accordingly, there is much to suggest that the high competition in the market will also reduce the margins, as the fees are likely to fall gradually. To compensate for the lower margin in the future, Coinbase will be forced to increase sales in order to maintain profit.

4. Regulatory uncertainty

The risk of restrictive crypto regulation has increased significantly in recent months. More and more experts like hedge fund legend Ray Dalio or the former SEC chairman Jay Clayton expect that there will be greater restrictions for crypto investors, such as unfavorable taxation. Coinbase is very dependent on the political benevolence and the American financial regulator SEC, whose power should not be underestimated.

5. The (r-) evolution eats its children

Even if decentralized financial applications (DeFi) are not yet suitable for the masses and for regulatory reasons hardly have a chance of becoming widely accepted, they represent a long-term danger for central (crypto) financial service providers. Provided that the DeFi -Sector is not regulated to death, it could represent an alternative for “crypto CeFi players” like Coinbase with ever better offers and user-friendliness and gain market share for itself in the long term.

Conclusion on the Coinbase share

If you are looking for a quick x-fold of your capital contribution, you should keep your hands off such heavyweight stocks and try your luck with crypto currencies. In contrast to Bitcoin mining companies listed on the stock exchange such as 8 Hut Mining or Riot Blockchain, Coinbase represents a comparatively stable equity investment. With the war chests filled and the standing achieved through the mega IPO, Coinbase should be excellent for difficult times and a face tough competition. Convinced “Hodler” -type crypto enthusiasts shouldn’t care about the high rating. However, more critical investors might be well advised to wait for the next correction in the crypto market. Due to the high correlation to be expected, a significant correction with attractive entry prices is likely to occur in the share as well.

Disclaimer: The text is solely the personal opinion of the author. No advice or recommendation is given.

BTC-ECHO Magazin (4/2021): Is it worth investing in NFTs?

The industry magazine for Bitcoin and blockchain investors.

Exclusive top topics for a successful investment:

• NFT: between hype and substance
• FLOW: The new NFT king?
• Taxing mining properly
• 2021 is so bullish
• An interview with the Bundestag

Order free copy >>