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Coinbase Navigates To $ 100 Billion Valuation On Crypto Frenzy

(Bloomberg) – Looks like Wall Street is on the verge of getting 100 billion new reasons to believe in Bitcoin. Coinbase Global Inc., the fast-growing exchange at the center of the cryptocurrency speculative frenzy, is set to become public this week to a staggering valuation of around $ 100 billion. That’s more than the venerable New York Stock Exchange and the Nasdaq Stock Exchange put together – for a company that didn’t even exist a decade ago. Coinbase’s position as the Big Board of the US crypto scene and a potent symbol of the risks and rewards of the new era of digital currency. According to Bloomberg estimates, its founders, Brian Armstrong and Fred Ehrsam, have holdings worth $ 15 billion and $ 2 billion, respectively. Coinbase said last week that it expects to report a profit of $ 730 million to $ 800 million in the first quarter, more than double what it earned in 2020. And revenues for the first three months of 2021 likely topped last year’s $ 1.3 billion total. . This compares to the $ 5.6 billion in revenue generated by Nasdaq last year. Coinbase has 56 million verified users and adds around 13,000 new retail customers per day, according to cryptocurrency analysis firm Messari. . ”Mira Christanto, an analyst who covers the company for Messari, said in a research report. “The market has shown that investors crave exposure to crypto through the stock markets.” It’s a staggering rise for a business started in a San Francisco apartment in 2012 by Armstrong and Ehrsam, who met online in a Bitcoin forum on Reddit. Apparent demand for Coinbase shares reflects appetite for all things crypto: Bitcoin has almost eight times as much in the past year, hitting a record high of $ 61,742 in mid-March The opportunity for Coinbase is now to capture the growing number of institutional and professional clients, such as MicroStrategy Inc. and Tesla Inc., who buy Bitcoin over the long term. “It’s going to be the holy grail for them if they can keep this business, because these people are seen more as holders than traders,” said Julie Chariell, senior analyst at Bloomberg Intelligence for financial technology and payments companies. , providing additional products like custodial services could mean Coinbase could look more like a bank than an exchange in a few years, according to Chariell. “It’s a bigger game, becoming a one stop shop for whatever you want to do with your crypto assets,” she said. Coinbase spokesman Elliott Suthers declined to make company officials available for comment, citing the “quiet period” Coinbase is required to maintain before its Nasdaq listing. It has been a long and sometimes grueling road towards the expected beginnings, and there are still risks to its business model. Coinbase revealed in the filings for the sale of shares that it had received a summons and exchange commission. According to a person familiar with the matter, the investigation was linked to XRP, the digital token created by Ripple that is the subject of a lawsuit with the SEC alleging that it was sold as an unregistered security. month, the SEC announced that it was suing Ripple and two of its founders for violating U.S. securities laws. Coinbase was forced to remove the XRP list, which at the time was the third most valuable cryptocurrency in the world.It is difficult to say how the loss of XRP affected Coinbase’s revenue because Bitcoin was skyrocketing towards records, Bloomberg Intelligence Chariell said. A greater risk would be the need to delist many of the alternative coins that Coinbase now offers if the SEC’s case determines that XRP is security. “It’s a risk, sure, but I just don’t think it’s a big risk in that. She said. Despite the close scrutiny of XRP, Coinbase’s expansion plans appear to be working. In 2020, coins on the exchange other than Bitcoin and Ether made up the largest share of revenue, at 44%, according to its filing with the SEC. “It made economic sense for Coinbase to list high demand tokens due to increased competition from other exchanges,” Messari’s Christanto said. Bitcoin Link Another risk: Coinbase’s fortunes tend to match history volatile bitcoin. The exchange only made profits last year, as institutional demand for crypto assets propelled Bitcoin and other coins such as Ether to new heights. The last lean years, known as the crypto winter, spanned from 2018 to 2019, with Bitcoin hitting a low of around $ 3,100 in December 2018. Until then, Coinbase was known to only list the big hitters of the crypto world including Bitcoin, Litecoin and Ether.Coinbase outlook will not be all about a single token like XRP. The majority of its revenue comes from trading fees, with retail clients charging an average of 1.4% and institutional clients around 0.05%, according to Christanto. To get through the lean years, Coinbase led seven rounds of fundraising. for a transport of more than 500 million dollars since September 2012, according to a study by Messari. This is in addition to the revenue from the sale of Bitcoin and Ether, which more than tripled last year to $ 134 million, according to Messari, all of which has allowed Coinbase to position itself publicly. Based on figures provided by the company, Chariell calculated that 5.5 million monthly users equals $ 3 billion in revenue in 2020. Top 12 FinTech companies to go public in the past six months had 36-fold price-to-sales ratios, she said. If you multiply that number by 2020, you get a very large number. “You easily have a market cap of over $ 100 billion,” she said. For more articles like this, please visit us at bloomberg.com. news source. © 2021 Bloomberg LP

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