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Coinbase’s leading position in the market could tumble if other exchanges try to take a bigger slice of the market.
Coinbase will soon become a publicly traded company and now analysts are discussing how valuable the exchange is. Now analysts estimate that the largest exchange in the United States may be overvalued, while others argue Coinbase valuation could reach over $200 billion. New Constructs, an investment research firm, estimates that the exchange should be valued 80% less than its expected $100 valuation.
Two days ago, Coinbase had released its Q1 estimated earning results for 2021 in an S-1 regulatory filing, ahead of its public debut on April 14. The company’s total revenues amount to 1.8 billion in net profits, eclipsing its performance for the previous year.
$100B Coinbase Valuation Is ‘Ridiculous’
Delphi Digital, a digital asset research firm, calculates that Coinbase is worth between $160 and $230 billion if the overall performance of the stock surges, while brokerage firm DA Davidson calculated a value of $90 billion.
“The price of COIN will fluctuate greatly depending on forward guidance and growth expectations as well as the valuation multiple it winds up commanding,” Delphi Digital wrote.
Although, this is not the case with New Construct. The company believes its $100 billion valuation is “ridiculous”, adding that the crypto market is not mature enough. Coinbase’s valuation will rise as long as the platform continues to increase its user base, which reportedly incremented 6.1 million. This is a 57% between 2018 and 2020, reaching 43 million verified users in Q4 of last year, according to Delphi.
“Even though Coinbase’s revenue surged over the past 12 months, the company has little-to-no chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion,” New Constructs said in a note.
New Constructs believes that Coinbase’s leading position in the market could tumble if other exchanges try to take a bigger slice of the market. As reported, crypto exchange Kraken will also go public in 2022 through a direct listing and not an Initial Public Offering. According to the company, other competitors may offer lower to zero fees as part of their strategies to take a greater role in the crypto space.
Coinbase’s ideal valuation, according to New Constructs, suggests that the exchange should be close to $18.9 billion, which represents an 81% decrease from the company’s expected $100 billion.
Brian Armstrong, CEO of Coinbase, owns 39.6 million Coinbase shares, trading at $343.58. Once the company goes public, Armstrong and other close stockholders will be able to sell right away their holdings, as a direct listing allows, unlike an Initial Public Offering.