By
Temitope Olatunji
April 26th, 2024
As Coinbase investors are celebrating the market debut of the trading platform, it is pertinent to beware of the stiff competition that will be wielded by other trading platforms plying their trade in the US
The realization that the Coinbase cryptocurrency exchange is making its public debut today has sent a shockwave to the financial world. The firm will be the first major digital currency trading platform to go public in the United States, reaffirming how far the entire cryptocurrency industry has grown over the years.
With fully diluted shares that can propel the valuation of the company to a $100 billion valuation, it stands as one of the largest companies to go public in the US this year. But the question of the underlying business fundamental of Coinbase spews a lot of uncertainties, as broader market analysts believe the firm’s close ties with the cryptocurrency industry can also drive a negative growth trend.
Amidst the ongoing bull run in the price of Bitcoin (BTC) and Ethereum (ETH), Coinbase reported a $1.8 billion revenue in the first quarter and a corresponding $800 million in profits. While this growth is impressive, a sharp reverse may be sparked if the global crypto market gets plunged into a bear cycle. Coinbase itself recognizes this probability and duly outlines the effect of rising or falling crypto prices as one of the risks of its business.
Engaging with Coinbase Post Public Debut
As highlighted by Coinbase in its Q1 earnings report, its monthly transacting users came in at 6.1 million, a figure that can surge or dip based on the overall conditions in the market per time. A top range of 7 million users can be recorded, a 5.5 million mid-range and 4 million monthly if the market sees an unprecedented retracement.
It should however be noted that in engaging with the platform after it is trading on the Nasdaq exchange, Bitcoin will represent just one of the many unique digital currencies that can be purchased from the platform. Drawing on this, Roger Lee, a partner at Battery Ventures, which invested in Coinbase in 2017 at a $1.6 billion valuation, calls bitcoin the “least interesting thing” about crypto right now as reported by CNBC. He believes Coinbase will be the index for all the other innovative coins out there in the space today.
“For a lot of people day-trading Coinbase, they’ll be fixated on the price of bitcoin,” Lee said in an interview. “For people who are long-term investors and see everything going on not just with bitcoin but with the 40, 50, 60, 100 tokens over time that enable all these other use cases, they’ll realize that Coinbase is an index for the other things being built.”
While Bitcoin and Ethereum are the flagships that stirred the meteoric rise in the valuation of the company, the place of altcoins, and a general shift in decentralized financial marketplace offerings in the future cannot be ruled out.
Coinbase Investors Should Beware of Competitors
As Coinbase investors are celebrating the market debut of the trading platform, it is pertinent to beware of the stiff competition that will be wielded by other trading platforms plying their trade in the US. Kraken, Robinhood, and Gemini rank amongst the top competitors as they may redefine a no-commission trading offering to gain more market share. Coinbase relies primarily on these fees to generate its revenue.
The future potentials and survival of the company are thus dependent on its ability to build a lasting structure that will thrive irrespective of these and more potential threats.