In the past year alone, we have experienced a pandemic, countless Zoom calls, PPP Loan Fraud schemes, and plenty of stimulus checks. All throughout this time the U.S. Federal Reserve Bank has been recklessly printing money so that the U.S. Government can keep the U.S. economy afloat while it deals with state-enforced lockdowns due to the ongoing Coronavirus pandemic. With a huge increase in the money supply a lot of Americans are choosing to use this influx in cash to invest in as opposed to paying for essential needs like rent, food, etc. This peculiar situation Americans are in where Governments are forcing millions of people out of work, compensating them in unemployment/stimulus checks, while also incentivizing them to not pay rent by placing moratoriums on various financial obligations like rent & student loans; all these factors have played a role in their being an increase in market liquidity & activity from individual investors. One of the biggest beneficiaries of this has been Bitcoin, which has had 200% growth in 2020 alone. When an asset of any kind increases 200% for a year, it’s going to catch the attention of Institutional Investors that control the big money like Hedge Funds, Government Pensions, Foreign Governments, etc.
Not only has the price of Bitcoin increased but the value of the entire cryptocurrency market as a whole has increased to a total value of over $2.2 trillion. To put this into prospective, the largest stock exchange in Canada is the TSX (Toronto Stock Exchange) with a market capitalization of $2.62 Trillion. The TSX was founded in October of 1861; Bitcoin was created in 2009. If there was any doubt that Bitcoin & other Crytpocurrencies like Ethereum would not have staying power in the U.S. economy both as an investment vehicle as well as a utility for the everyday consumer; today’s big move by Coinbase to go public via direct listing will silence those doubts.
You may be wondering, why is it significant that Coinbase is going public when there are already people investing heavily in Bitcoin & other Cryptocurrencies?
Coinbase becoming a public company will establish more credibility for Cryptocurrency and the technology & industries that supports it. Mainly, Blockchain technology & Decentralized Finance in addition to various other products & services that can be “Decentralized” by using the technology. No other business related to Cryptocurrency has been able to break the ice when it comes to becoming a publicly traded company on the stock market. That changes today, giving the more conservative investors the option to invest in Bitcoin or other Cryptocurrencies indirectly by placing money into Coinbase (Ticker symbol: COIN) as opposed to buying bitcoin outright, which some investors, specifically the managers of Hedge Funds, Pensions, Money Managers of wealthy individuals, may still be skeptical on Cryptocurrency because of their lack of knowledge towards the concept of Blockchain Technology & DeFi.
So What Is A IPO?
In a nutshell, an IPO is when a company goes public and embraces the help of big investment banks to help back their shares from the beginning. By using the traditional route of filing an IPO and the expertise of the bigger banks, companies can see a more valuable price per share from the start. If the company needs to raise funds, it will usually file an IPO and issue new shares in exchange for funds. Going public via a direct listing (Which is what Coinbase is doing today) is a little bit different, as in you exclude those big bankers (and the charges/fees that come with using their services) and handle going public independently. Every person that has shares in the company; the founders, employees, and the Angel Investors that provide the initial “Startup” capital will already have stocks that can be put on the market to sell. This is what you will be using once your company goes public as no new shares can be issued.
Filing a direct listing can unleash an abundance of rewards for Coinbase, from avoiding lockup periods (amount of time after the IPO that stock can be sold by insiders after the IPO.) The range for lockup periods spurred by a company going public ranges from as little as 3-6 months and has been seen to take as long as 6 months to a year plus (SPAC IPOs specifically). These benefits alone make it a valuable choice that Coinbase had made for themselves. Furthermore, if things go realtively well & the value of COIN stock doesn’t tank weeks after it’s available to the public, that will create an incentive for other cryptocurrency companies to consider going public in the future as it remains clear that this crypto wave is far from over (It’s currently estimated that over 90% of Americans are NOT invested in any Cryptocurrency whatsoever.)
Finally, from a stock perspective, investors are intrigued by the earnings potential of Coinbase as a company. This was shown to be upwards of $322 million when it comes to net income after everything was deducted from the $1.1 billion in revenue they ranked in during the year 2020, one of their strongest years yet. It has huge potential for long-term growth, seeing as that both individual and institutional investors around the world are looking to have exposure in their portfolios to companies related to Cryptocurrencies.
A $4 Trillion Market Ripe for the Taking
We have TVs that can tell us what we like to watch. Phones that can just about do as much as a desktop used to do all on its own. This new wave of digital currency has made many people wealthy since it first came into existence back in 2009 when Bitcoin made its debut as Satoshi Nakamoto revealed it to the world. Taking away the centralization that banks around the world have over the people’s money supply (Important to note that any money the Government has is in fact the people’s money) and recording transactions on a blockchain to ensure trust & security, Bitcoin became a legitimate currency that could be used not only to make payments but also as a storage of value, similar to what Gold has been for thousands of years.
Bitcoin is known as the “original cryptocurrency” because it was solo when it debuted, and it was not until after its debut that other currencies decided to come into existence. With only 21 million Bitcoins set to be in existence, Bitcoins are minted by those maintaining the record by adding transactional data. From there, they get mined by a node hosted by one of their supporters, and as time passes, the value of the Bitcoin increases. Over time, engineers/cryptographers will design better security measures and protocols to ensure that Bitcoin stays on the cutting edge of technology at all times. Those who prefer to add a variety of Crypto to their portfolio can do so by using Coinbase to buy assets like Ethereum, XRP, Chainlink, and other types of digital currencies. With over 50 types of Crypto available today at Coinbase, there is not a shortage of different ones offered by the U.S. based company, which leads to the potential for exponential growth in this sector.
The Acceptance of Cryptocurrency in a Modernized World
At first, nobody wanted anything to do with cryptocurrency except the few people that saw the potential it had when one first discovered it. Bitcoin did come with a lot of headaches as all new disruptive technologies & systems do. Much like the early stages of the internet, new technology tends to gravitate towards criminal activity due to the continuous cat & mouse game between law enforcement & criminals; there needed to be new & innovative ways to complete illegal transactions with anonymity. The infamous Silk Road was the first online marketplace for individual’s with Bitcoin to trade in exchange for products and services, these things were mostly victimless crimes (Drugs of all kinds, mostly marijuana.) but every now and then there would be products/services listed that went beyond the pale, like stolen credit cards, Hitmen services, and tutorials on how to hack an ATM machine. Despite the site being shut down by the FBI after only two years in business, it serves as an inflection point in the growth of Bitcoin & cryptocurrency as a whole; and since we’re on the topic…..#FreeRossUlbricht.
From showing off their new Visa card for Coinbase users last October to offering loans to Coinbase users by using their Bitcoin as collateral (With No Credit Check) inspiring mass adoption across the country by making the purchase & storage of Bitcoin easily available and accessible, this is a company that you want to pave the way for the industry of all things Crytpo, De-Fi, & Blockchain. For the past decade there have been a lot of detractors towards Bitcoin, even today you can find people insinuating that Bitcoin is a Scam, or that it’s actually controlled by a central authourity. However at the end of the day money talks and when you have over $2 Trillion invested in an entirely new industry that didn’t exist in the early 2000’s; that’s not a scam, that’s the next evolution of the internet. The same way Facebook, Inc. paved the way for other social media companies to grow and become public companies (Snapchat, Pinterest, Twitter) and a major influence in our society today, Coinbase becoming a public company will do the same for Bitcoin & other Cryptocurrencies.