What is Coinbase?

In this article, we discuss Coinbase and its monumental stock market listing.

About Coinbase

Founded in 2012 by Brian Armstrong and Fred Ehrsam, Coinbase is a US-based online platform that allows users to buy, sell, transfer and store digital currencies. Coinbase offers around 250 types of crypto assets, including some of the more well-known cryptocurrencies, such as Bitcoin and Ethereum. Users can also send cryptocurrencies to each other or pay at any merchant that accepts Visa with a Coinbase Card.

The primary service offered by Coinbase is the ability to buy and sell cryptocurrencies using fiat currencies, such as USD, EUR and GBP. The company serves users globally and breaks its clientele down into three categories: retail users, institutional investors and ecosystem partners. Out of these, the majority of their clients are retail users.

Coinbase joins the Nasdaq

On 14 April 2021, Coinbase became the first major cryptocurrency company to go public through a direct listing on the Nasdaq Global Select Market under the ticker symbol $COIN. Since it was a direct listing, shares were not officially priced before they start trading. However, with direct listings, reference prices are set to help investors get an idea of a company's value.

Coinbase's listing on the Nasdaq brought increased visibility and credibility to the broader cryptocurrency industry. It served as a validation of the potential and value of cryptocurrencies, as well as the companies that operate within the space.

The Nasdaq listing also brought attention to regulatory scrutiny and oversight to Coinbase. As a publicly traded company, Coinbase is subject to financial reporting requirements, corporate governance standards and must adhere to certain requirements regarding increased transparency. The regulatory oversight may have helped to build trust and confidence in Coinbase among investors and regulators alike.

Direct listings versus IPOs

Because Coinbase went public through a direct listing rather than an IPO (initial public offering), it's worth noting the difference between the two.

With IPOs, companies that want to go public will hire underwriters that help them through the listing process. This includes assisting in pricing the shares for the initial offer, assisting with regulatory requirements, buying the shares from the company and selling them to investors. In return, the company pays the underwriter a fee, typically a percentage per share. In contrast, there are no underwriters involved with a direct listing, and therefore, it is usually cheaper than an IPO.

Another difference is regarding the shares offered. In an IPO, a company issues new shares of the company, typically to raise capital. On the other hand, in a direct listing, a company issues existing shares, and employees or investors who already own shares can sell them directly to the public. In this case, a company does not wish to raise capital, and existing shareholders can trade their shares immediately as there is no lock-up period.

Investing in ETFs with exposure to Coinbase

There are ETFs that provide exposure to the broader cryptocurrency industry, which may include holdings in Coinbase or other related companies. These ETFs invest in a basket of cryptocurrency-related stocks rather than focusing solely on Coinbase.

Some crypto ETFs on our platform

Note: Some ETFs may (temporarily) not be available on our platform for your country due to regulatory reasons.

Pros and cons of investing in Coinbase

Coinbase is one of the leading cryptocurrency exchanges, but as with any investment, there are pros and cons to consider before investing.

Pros of investing in Coinbase

• Coinbase offers a diverse range of cryptocurrencies for trading, allowing investors to diversify their portfolios and potentially mitigate risk.
• The company generates revenue from other sources such as custody services, institutional trading and debit card fees. This diversified revenue stream can provide stability and potential for growth.
• The cryptocurrency market is still relatively young and has significant room for growth.

Cons of investing in Coinbase

• The cryptocurrency market is highly volatile, and the value of cryptocurrencies can fluctuate dramatically. This volatility can impact the financial performance of Coinbase, affecting its stock price.
• The cryptocurrency industry is subject to evolving regulatory frameworks and government scrutiny. Changes in regulations or unfavourable regulatory decisions could have a negative impact on Coinbase's operations and financial performance.
• Coinbase's performance is directly tied to the success of the overall cryptocurrency market. If the market experiences a downturn or loses popularity, Coinbase's revenue and stock price could be adversely affected.