Finance

The Coinbase listing marks the final step on the way from crypto to mainstream

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© Reuters. FILE PHOTO: This image shows representations of the Bitcoin and US dollar bills of the virtual currency

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By Tom Wilson and Anna Irrera

LONDON (Reuters) -Coinbase Global Inc, the largest U.S. cryptocurrency exchange, will be listed on the Nasdaq on Wednesday, marking a milestone in the journey of virtual currencies from niche technology to mainstream asset.

The listing is by far the largest of any cryptocurrency company to date. The San Francisco-based firm announced last month that private market transactions valued the company at roughly $ 68 billion this year, up from $ 5.8 billion in September.

According to interviews with investors, analysts and executives, this is the latest breakthrough in the adoption of cryptocurrencies, an asset class that was shunned by the mainstream financial world just a few years ago.

“The listing is significant in that it marks the growth of the industry and its adoption in mainstream business,” said William Cong, associate professor of finance at Cornell University’s SC Johnson College of Business.

, the largest cryptocurrency, hit a record over $ 63,000 on Tuesday. It has more than doubled this year as major investors, banks from Goldman Sachs (NYSE 🙂 to Morgan Stanley (NYSE 🙂 and well-known companies like Tesla (NASDAQ 🙂 Inc are excited about the emerging asset.

Coinbase’s direct listing – meaning Coinbase didn’t sell any shares prior to its market debut – should accelerate that process, according to Reuters polls, by raising investor awareness of digital assets.

“This is a very positive thing in itself for Bitcoin as it proves the bridge that was built from an esoteric arena to the left of the field of cowboys to mainstream finance,” said Charles Hayter of data firm CryptoCompare.

However, some institutional investors expressed concern about the long-term prospects for Coinbase and the crypto sector.

Swiss asset manager Unigestion said it was suspicious of the cryptocurrency hype and would therefore not buy Coinbase shares.

“We believe there is a lot of frenzy and exuberance in anything that looks like crypto,” said Olivier Marciot, portfolio manager at Unigestion, who oversees $ 22.6 billion in assets.

“Hedge funds and retailers are likely to be the early birds in these new stocks – they likely buy into them quite heavily – which shouldn’t be a clear indication of how they’ll be long-term.”

KEEP TO BITCOIN?

Other experts said the risks included Coinbase’s exposure to a highly volatile asset that is still subject to patchy regulation.

Coinbase was founded in 2012 and has 56 million users worldwide and an estimated net worth of $ 223 billion on its platform. This corresponds to a market share of 11.3% in crypto assets.

The company’s latest financial results underscore how sales have grown in step with the rally in Bitcoin trading volume and price.

In the first quarter of the year, when the price of Bitcoin more than doubled, Coinbase estimated sales at over $ 1.8 billion and net income between $ 730 million and $ 800 million compared to $ 1.3 billion for the entire year 2020.

“The correlation with Bitcoin will be very high after the stock stabilizes after its listing,” said Larry Cermak, research director on the crypto website The Block.

“If the price of Bitcoin goes down, it is inevitable that Coinbase’s sales and the stock’s inherent price will go down as well.”

According to others, regulatory risks also loom as Coinbase increases the number of digital assets that users can trade on its platform.

Coinbase suspended trading XRP in major digital currencies last year after U.S. regulators billed the affiliate blockchain company for an unregistered security offering of $ 1.3 billion. Ripple has denied the charges.

“With the expansion of the assets covered by Coinbase, it’s almost inevitable that other listings will come into question,” said Colin Platt, chief operating officer of the crypto platform Unifty.

Coinbase declined to comment.

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