Cryptocurrencies and Wall Street have been seen operating in two separate worlds, that is, until now.
Coinbase, the most popular cryptocurrency exchange in the US, is going public. This event holds colossal importance for both Wall Street as well as the crypto community. This is because not only does it make Bitcoin and other crypto coins more acceptable but offers investors another easier path to investing in Bitcoin.
Coinbase is a platform that allows users to trade and store cryptocurrencies and charges fees on all transactions. It profits when crypto coins, such as Bitcoin and Ethereum, trade higher. And in the first quarter of 2021, when Bitcoin’s price doubled with the company’s revenue being $1.8 billion.
The crypto industry has so far grown outside the traditional and regulated investment system and carries an image of being a high-risk asset due to its highly volatile nature and increase in crypto scams and hacks over the last few years. This listing is meant to not only help legitimize it but push the Bitcoin narrative further in the direction of mainstream acceptance.
Nasdaq has set the reference price for Coinbase at $250 which would give the company a valuation of around a staggering $65 billion. This is about eight times its valuation in a 2018 fundraising round. Major tides are turning in the crypto space as the digital asset continues to rack up headlines, with this listing business having a contributing factor helping it remain relevant throughout the years.
Why It’s Making Waves On Wall Street
To understand why this listing is making waves on Wall Street, it is important to understand what attracted some 56 million users of crypto to this platform.
When Bitcoin first emerged in 2010, it wasn’t exactly easy to trade. In the early days, Bitcoins enthusiasts had to first download the Bitcoin software, the actual program itself, run it on their computer, and maintain a wallet and a node on the network. Understandably, for many people, such an exhaustive process was technologically too big of a deal to bother with.
But with Coinbase’s inception in 2012, Bitcoin and crypto supporters now had an easier, more convenient way to buy, sell, and store cryptocurrencies.
The company makes its revenue by charging a small fee on every crypto transaction that takes place through their website, much like a currency exchange. And it’s these transaction fees that make up the vast bulk, 96%, of Coinbase’s income and what has tied the company’s performance directly to those crypto markets. In fact, Coinbase made somewhere over $322 million profit in last year alone as crypto gained more legitimacy among traditional investors
Over the past year, Bitcoin’s usage has somewhat codified which has opened the door for a lot of professional money managers, institutional money, and hedge funds to come in and get their hands dirty in this extremely volatile but lucrative sandbox.
Tesla has been one of the front runners in this Bitcoin dash, declaring their support for the cryptocurrency when they announced an investment of $1.5 billion worth of Bitcoins. The company even allows its customers to purchase any of their cars using Bitcoin. Among others that have also jumped aboard the Bitcoin or crypto bandwagon and MicroStrategy, Square, PayPal, BlackRock, MasterCard are just some of the big names that have declared their allegiance with cryptocurrencies.
The crypto trading is also getting transformed, not only through the listing but availability of trading platforms such as bitql. These essentially provide auto-trading services to users, allowing them to benefit from short-term crypto booms without even being well-versed in the crypto space.
A Brighter Future For Crypto?
The listing of Coinbase on the NASDAQ is shaping up as a watershed moment for the crypto industry, with the biggest exchange in the US now getting exposure to mainstream stock-market investors. This event is being tabbed by many financial analysts and crypto supporters as a catalyst that may eventually drive further adoption of digital assets.
Just a day before the listing, a surge was observed in some major cryptocurrencies. Bitcoin, the biggest cryptocurrency by market value, saw a rise in value surging to new all-time highs of $64,000. Another popular cryptocurrency, Ethereum, also rose to a new record value of about $2,400.
The listing is just another major step toward renewed trust in the cryptocurrency that may have been lost after the 2017 bubble burst. It also is an indication of an era of digital currencies that is just in its prime and is suspected by many to become the norm in the future.
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