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Hi Everyone,
The markets certainly have Coinbase on the brain today, as every financial journalist and crypto fan seems to be talking about it.
There's certainly no denying the level of legitimacy this brings to the crypto space at large, and it's certainly a reason to celebrate.
Both Bloomberg and CNBC are featuring crypto-friendly guests non-stop.
They even invited me to appear on Bloomberg TV this morning. Will try and get a recording for you later on and post it to Twitter.
The man of the hour, Coinbase co-founder and CEO Brian Armstrong, was on CNBC this morning talking about the advantages of investing in a company like Coinbase over simply buying digital assets themselves.
For many institutional investors of course, there isn't much of a choice, as there are still very few structured products that allow hedge funds to get direct exposure to bitcoin, let alone some of the smaller digital assets.
Nonetheless, Armstrong informs us that of the approximately 11% of all crypto assets that Coinbase is holding for their customers, about half of that is for institutions.
So despite the lack of structured products, there are clearly plenty of corporate hodlers out there. Yet, the appetite for more exposure to this asset class is insatiable.
Today also kicks off bank earnings season, but I'm not sure how many people care about those fossils. |
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Helluva valuation
The Nasdaq previously gave shares of Coinbase a reference price of $250. However, it was revealed around 10:30 a.m. that these shares would open at $350.
Crypto traders looking to front run the listing are already trading tokenized futures of $COIN on the FTX platform with an implied valuation of $156 billion. So clearly, it's not just institutions who are excited here.
Even with the blowout first quarter that Coinbase had, it does seem difficult to justify these numbers. Yes, there is the old saying that in a gold rush, the ones who make the most money are the guys selling picks and shovels. This certainly applies to Coinbase.
However, the figures above only work if the company's profit margins continue to grow, and the fact that they're charging approximately 0.5% per trade leaves way too much room for competitors to undercut their business.
Just as we saw in the retail stock market over the last few years, commission wars got so fearsome that many online brokers now offer stock trades with zero commissions. The same thing can certainly happen in crypto. In fact, it's quite likely. |
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The pumper and the pumpee
Many have opined that today's high-profile crypto listing is contributing to the rise we're seeing in digital currency prices, and that may be so.
But I would opine that the inverse is probably more true. Coinbase isn't pumping bitcoin. Bitcoin is pumping Coinbase.
Sure, there may be some out there who are buying today feeling more comfortable about the future of the crypto space now that one of the world's largest exchanges is a publicly traded entity, but let's not forget that Coinbase specifically chose the timing of their listing to coincide with the bitcoin bull run, and not the other way around.
Indeed, it's a good time for any crypto company to go public right now, and it is likely that many will. Also, many will choose to raise money directly through the crypto market with new coins being offered.
Further, exchanges that already have a coin on the market are also feeling the love in this most recent hype. There is so much to look forward to.
Please note that tomorrow is Independence Day in Israel, so I will not be writing a newsletter. See you on Friday.
Best regards, |
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Mati Greenspan Analysis, Advisory, Money Management |
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