Coinbase: the largest US cryptocurrencies exchange went public

Coinbase: the largest US cryptocurrencies exchange went public

18 May 2021Reading time: 3 minutes

The largest US cryptocurrencies exchange went public on April 14th and is now listed at the NASDAQ. The company benefited from the investors’ interest in cryptocurrencies during the first quarter of 2021 and, as a result, there was high expectations for the Coinbase stock. So far, the evolution of the company’s stock price has been quite disappointing for investors.

What is Coinbase?

The company was founded in 2012 to offer Bitcoin investors a safe and efficient way to exchange the cryptocurrency. Initially, only Bitcoin could be traded on the exchange platform. The range of cryptocurrencies, which can be trade on Coinbase, quickly expanded and investors can currently trade about 50 cryptocurrencies on the platform. This includes Bitcoin, Ethereum and Litecoin for example. Investors can use Coinbase to exchange a cryptocurrency against another cryptocurrency or to exchange it against USD. The Coinbase app also gives the possibility to send cryptocurrencies to other people and to receive payments in cryptocurrencies from other people. The cryptocurrency market is often criticized for its lack of transparency and regulation. This could scare off investors, who are potentially interested in trading these cryptocurrencies. Since Coinbase is a regulated company, it offers a good level of security and transparency for investors eager to trade cryptocurrencies.

How is Coinbase doing so far?

The main way for Coinbase to generate revenue is through fee on trades and deposit funds. Therefore, Coinbase’s revenue is highly correlated to the evolution of the cryptocurrency market. When there are many trades, Coinbase will generate a higher revenue and when there are fewer trades, the company will generate a lower revenue. The company itself declared in its filing with the Securities and Exchange Commission (the US financial market authority): “Our operating results have and will significantly fluctuate due to the highly volatile nature of crypto”. Due to the investors’ high interest in cryptocurrencies during the first quarter of 2021, it is not a surprise that this quarter has been particularly good for the company. A USD 750 million profit is expected for the three first month of this year. This is by far the largest profit in the company’s history. For comparison, it is about twice as high as the company’s 2020 profit. Coinbase’s revenue also significantly increase during the first quarter. The company reported a USD 1.8 billion revenue compared to USD 1.3 billion revenue for the entire year of 2020.

Stock overview

The reference price for the Coinbase share was fixed at USD 250, but on April 14th 2021, the first trading day of the Coinbase stock, the share opened at USD 381.00 showing the investors’ initial enthusiasm for the stock. It then reached its highest price of USD 429.54 on that day about half an hour after the opening. After that, the stock price decreased and it closed at USD 328.28. So far, the trend has been negative and with a few exceptions, the closing price was often lower than the opening price. The stock reached its lowest price so far on May 4th 2021 when it was traded at USD 275.61.
The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

Don’t miss any investment idea. Subscribe now to the Vontobel newsletter!

Vontobel products on Coinbase are tradable at DEGIRO.

Discover Vontobel’s product on our Website.

Important legal information:
This information does not constitute a financial analysis, but product advertisement. Thus it does not meet the legal requirements to ensure the impartiality of financial analysis and is not subject to trade prohibition before the publication of a financial analysis.
Fordetailed information, particularly regarding the structure and the risks associated with an investment in the derivative financial instruments, prospective investors should read the Base Prospectus, which is available together with the Final Terms and any supplement to the Base Prospectus in electronic form on the issuer’s website: Additionally, the Base Prospectus, anysupplements to the Base Prospectus and the Final Terms are available inprinted form, free of charge, at the registered office of the issuer: Vontobel Europe AG, Bockenheimer Landstrasse 24, 60323
Frankfurt am Main, Germany.

Investors should consider the applicable selling restrictions.
Companies of the Vontobel group may directly or indirectly pay commissions in varying amounts to third parties (e.g. brokers) in connection with the public offer and the distribution of the derivative financial instruments. Further information is available upon request from your distribution partner. 

17/01/2022 01:58:27