What are the consequences of the Coinbase IPO for Decentralized Finance (DeFi)?

Coinbase’s IPO has far-reaching effects on the entire crypto space and Decentralized Finance (DeFi) in particular is one of the top winners – why is that?

The Coinbase IPO was on everyone’s lips this week and not only Bitcoin, but above all DeFi tokens, have risen sharply since the listing.

Coinbase announced its quarterly figures a few weeks ago. Overall, the company generated total sales of just under $ 1.8 billion in the first quarter of the current year. Additionally, net income was estimated by Coinbase to be between $ 730 million and $ 800 million. But what is the connection between a centralized crypto exchange and decentralized finance?

The train of thought is relatively simple. Since Coinbase published its quarterly figures and has been listed on the exchanges, there has been a clear benchmark for evaluating decentralized exchanges. Standard values ​​for metrics such as number of users, trading volume, Total Value Locked (TVL) and so on ensure that DeFi projects can for the first time be compared with a company listed on the stock exchange.

This is because a majority of the decentralized exchanges (DEX) have their own tokens. UniSwap has its UNI token, SushiSwap has SUSHI and so on and so forth. Most of these tokens currently serve as governance tokens with which holders can have a say in the development of the protocol. However, some DeFi projects are already allowing their owners to share in the profits of the respective decentralized trading platform. Therefore, for example, SUSHI holders can stake their coins and receive part of the fees for trades made on SushiSwap as a reward. These developments ensure that DeFi protocols can be assessed using traditional standards from the financial world. In addition, there is now Coinbase as a benchmark on the exchange.

Is DeFi Undervalued?

Spencer Noon, a well-known crypto analyst and investor, has made a comparison between Coinbase and the currently largest decentralized exchange UniSwap.

Although Coinbase is four times as old as UniSwap and has almost fifty times as many users, the annual trading volume of the two exchanges is only slightly different. Assuming now that the total capital tied up in UniSwap and the number of users will grow in the coming years, it could be that there could be a certain parity between the Coinbase share and the UNI token.

UniSwap currently only has a market capitalization of just under 18 billion US dollars, while Coinbase is currently with over $ 65 billion is rated. The same line of reasoning naturally also applies to other decentralized trading platforms.

If Coinbase should settle at its current price level in the next few weeks, then it is quite possible that the DeFi sector could go through a kind of “re-evaluation” because it is comparatively “cheaper”. The big question is whether institutional investors will recognize this opportunity. The fact is that at the time of going to press, both UniSwap (UNI) and SushiSwap (SUSHI) have posted double-digit price gains since the Coinbase IPO.

DeFi Pulse Index (DPI) sets a new all-time high

But not only SUSHI and UNI performed surprisingly well this week. The “ETF Token” DeFi Pulse Index by Index Coop and Tokensets hit a new all-time high at $ 549.15 last Friday.

DPI is currently composed of 15 different tokens from Decentralized Finance. In particular, UNI, SUSHI, AAVE and Maker’s Governance Token (MKR) have given the DeFi token a boost this week. MKR was the top performer, increasing by over 50 percent on a weekly basis.