LONDON (Reuters) -Coinbase Global Inc., the largest cryptocurrency exchange in the United States, will trade on the Nasdaq on Wednesday, marking a milestone in the journey of virtual currencies from niche technology to major assets.
The listing is by far the largest of a cryptocurrency company, and the San Francisco-based firm said last month that private market transactions had valued the company at about $ 68 billion this year. of $ 5.8 billion in September.
It represents the latest breakthrough in the acceptance of cryptocurrencies, a class of assets that only a few years ago had been shunned by traditional finance, according to interviews with investors, analysts and executives.
“The listing is significant as it marks the growth of the industry and its acceptance into the core business,” said William Cong, associate professor of finance at SC Johnson College of Business at Cornell University.
Bitcoin, the largest cryptocurrency, hit a record high of $ 63,000 on Tuesday. This year has more than doubled, as large investors, Goldman Sachs banks in Morgan Stanley and reputable companies like Tesla Inc. are saving on emerging assets.
Coinbase’s direct listing (meaning it has not sold any shares before its market debut) is likely to speed up that process, Reuters interviewees said, raising awareness of digital assets among investors.
“This is very positive for Bitcoin in itself, as it demonstrates the bridge that has been built from an esoteric field, to the left of the field, full of cowboys, to traditional finance,” said Charles Hayter, of the data firm CryptoCompare.
However, some institutional investors expressed caution about the long-term prospects of Coinbase and the crypto sector.
Swiss asset manager Unigestion said it distrusted the hype about cryptocurrencies and as a result would not buy shares of Coinbase.
“We believe there’s a lot of frenzy and exuberance in everything that seems cryptographic,” said Olivier Marciot, portfolio manager at Unigestion, which oversees $ 22.6 billion worth of assets.
“Hedge funds and retail will likely be the first birds in these new stocks, probably buying them strong, which should not be a clear indication of how they will be in the long run.”
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Other experts said the risks included exposing Coinbase to a highly volatile asset that is still subject to irregular regulation.
Founded in 2012, Coinbase has 56 million users worldwide and an estimated $ 223 billion in assets on its platform, representing 11.3% of the cryptocurrency market share, according to the regulatory files.
The company’s most recent financial results underscore how revenue has risen in parallel with the rise in bitcoin trading volumes and prices.
During the first quarter of the year, as bitcoin doubled in price, Coinbase estimated revenue of more than $ 1.8 billion and a net profit of between $ 730 and $ 800 million, against revenue of $ 1,300. million dollars for the whole of 2020.
“The correlation with bitcoin will be very high after the stock stabilizes after trading,” said Larry Cermak, research director of crypto website The Block.
“When the price of bitcoin goes down, it’s inevitable that Coinbase’s revenue and the inherent share price will also go down.”
Regulatory risks also appear, others said, as Coinbase increases the number of digital assets users can trade on its platform.
Coinbase last year suspended trading in the major XRP digital currency after U.S. regulators charged the associated blockchain firm Ripple with an unregistered stock offering of $ 1.3 billion. Ripple has denied the charges.
“Given the expansion of assets covered by Coinbase, it is almost inevitable that other listings will be called into question,” said Colin Platt, chief operating officer of cryptography platform Unifty.
Coinbase declined to comment.
Report by Tom Wilson and Anna Irrera Edited by Nick Zieminski