Let’s talk about Coinbase direct listing on Nasdaq

Hello my fellow bloggers! As you already know, Coinbase will be listed on Nasdaq today (April 14). What does it mean for crypto? What is the difference between DPO and IPO? Let’s dive in an investigate.

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Why this is important?

Coinbase means a lot for crypto market. It is not just a large exchange with high trading volume. Coinbase is an ecosystem with the goal to change finance world with the power of crypto currencies. The most known part of its business are certainly Coinbase Pro and Coinbase Prime – crypto exchanges for individual and institutional investors correspondingly. Coinbase Commerce department provides companies all over the world with access to crypto payments. Coinbase Custody is a product for storying crypto that is compatible with 100 assets that form 90% of crypto market capitalization. In addition to that Coinbase stands behind USD Coin (USDC) and works with Visa to issue crypto card. Finally Coinbase Ventures is financing 68 startups to boost innovations in crypto.

The entire ecosystem goes public on Nasdaq. This will be the biggest listing on Nasdaq and the biggest listing of US tech company since Facebook. The listing will take crypto market one step close to mass adoption by financial institutions. This will be the first listing, but not the last one. Other crypto exchanges are actively working at the same as well as some mining companies (at least two in China) according to Blomberg. Crypto is going public. Soon any investor will see the charts of crypto companies on all major platforms.

What is the difference between DPO and IPO?

IPO is a fund rising event, DPO is not. As a part of IPO a company issues a massive amount of new shares to be sold to the investors. All money obviously go to the company. During DPO existing shareholders sell their shares to the public. In other words, money go to sellers.

The second important difference is price discovery. In case of IPO all price discovery goes after the event when those who bought at IPO price can sell. In case of DPO price is defined by the market. In other words, we can see some crazy price action as trading starts. There are some other differences you can find in the table below:

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What perspective does Coinbase have?

I would want to divide perspectives on short term and long terms. In a short term, everything looks good. Nowadays we see stocks grow regardless of revenue reports. Hundreds of companies release poor reports but their stocks are still growing relatively fast with the market. Coinbase actually has some great revenue stats.

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The main source of revenue for Coinbase (96%) is trading commissions. As crypto market grows, trading volume increases. As a result, revenue for exchanges shows a very positive dynamics. In 2020 Coinbase got $1.1 billion. In 2021 Coinbase is likely to see a significant increase in revenue. Until a new crypto winter comes, it is safe to assume Coinbase will stay in a huge profit. This is why I think in a short term the price will go up.

In a long term, the situation is not that good, and I’m not referencing upcoming crypto winter here. As Coinbase states in its papers the long term success depends on Coinbase mission to revolutionize world finance sector. There are so many things that could go wrong. Just to name a few risks:

• Upcoming regulations of crypto market
• Governments of some countries banning crypto
• Crypto winter and revenue loss
• Bitcoin going less decentralized (less secure) because of large mining pools
• DeFi concurrence

If you are a true believer and believe in crypto success in general, you may see this as minor risks. However all institution and large investor will not have the same courage.

How do you feel about Coinbase DPO? Let me know in the comments below!

Sources: First | Second | Third | Forth | Fifth

Disclaimer

I’m not a financial of any kind. I encourage you to check all information yourself and make decision only based on your own opinion. All articles are created for solely entertainment purpose.

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