Brace Yourselves…The Coinbase IPO Is Coming
If you ever bought or sold Bitcoin or other cryptocurrencies it is highly likely that you have used Coinbase. One of the most popular cryptocurrency exchanges in the United Sates, Coinbase is going public on April 14, 2021. This will be the first ever cryptocurrency exchange to be listed on the NASDAQ and sold to investors around the world. Read on for some important information before you participate in this historic event.
What is Coinbase?
As mentioned in our Crypto Column, Coinbase is a cryptocurrency exchange. We might add, it is one of the largest cryptocurrency exchanges in the United States with around 50 million users. It provides a platform (service) that allows users to buy and sell crypto currencies with other Coinbase users. Think “eBay for Bitcoin.” It also offers users a place to store the crypto the buy and sell on Coinbase. Think “safety deposit box for your BTC.”
Is Coinbase Free?
It is free to create a Coinbase account, but if you want to buy or sell cryptos on their platform you are going to pay a fee, just like eBay. The fee structure on Coinbase is percentage based, meaning the higher the value of the crypto being traded, the higher the transaction total will be, and the higher the fee will be as a percent of that total. And right now, cryptocurrency values are at an all-time high. There’s some other ways Coinbase makes money too, including Pro subscriptions and issuing physical debit cards. All that to say, Coinbase revenues are flying high right now, up to $1.8 Billion in the first quarter of 2021 alone.
Why Is This A Big Deal?
This is the first cryptocurrency exchange to be listed on the stock market. Coinbase is one of the most popular cryptocurrency exchanges in the world. The Initial Public Offering (IPO) is being listed directly to the public instead of being sold directly to big money investors privately behind the scenes before coming to you. These factors, combined with the fact that Coinbase is going public at a time when worldwide interest in cryptocurrencies is at unprecedented levels, set the stage for the Coinbase IPO to be one of the most exciting events in the financial sector.
How Much Is Coinbase Worth?
The true market value of Coinbase remains to be seen, but some analyst price targets go as high as $400 per share. With rapidly increasing earnings and profitability, the speculations are running wild regarding Coinbase’s valuation. Nasdaq activity in early 2021 indicates a value as high as $77 Billion. Major investors believe the IPO may take it over $100 Billion. Remember, as an investor you are investing in the future performance of a company, and right now, investors think the future is bright for Coinbase.
Should You Invest In Coinbase?
All investments carry a certain degree of risk, and Coinbase will be no different. Some see investing in a crypto exchange a way to gain exposure to cryptocurrency without directly purchasing crypto. However, that link to cryptocurrency means the exchange’s revenues are dependent upon interest in crypto. A smart investor would educate themselves on the various cryptocurrency exchanges and the outlook on crypto before investing into this space. One strategy would be allocate a small percentage of your portfolio (1%-3%); that way you could get some exposure to the space without risking your entire savings. IPO's are inherently more risky and volatile than other investments, so if you do not have a high tolerance for risk it may be better to sit back and watch this one. As always, reach out to your Certified Financial Planner or contact us to find out if investing in Coinbase is right for you.
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This article is for educational purposes only and is not intended to be taken as investment advice. Coast to Coast Finance may earn a commission from purchases you make through affiliate links. Coast to Coast Finance does not own positions in any of the stocks mentioned in this article, nor does Coast to Coast Finance intend to open positions in, or recommend opening positions in, these stocks or funds. All investments involve risk, and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing.