The story of how a cryptocurrency exchange is filing to launch its IPO.
What Happened?
Coinbase Inc recently announced that it had confidentially applied with the U.S Securities and Exchange Commission (SEC) to go public. But before we head into the article, we want to tell you what Coinbase is.
Meet Coinbase
Unless you have been living under a rock (which we seriously hope you are not), Coinbase is one of the most popular cryptocurrency exchanges in the world. The company functions as a middleman in the crypto market by offering a platform for users to buy and sell different coins. Coinbase supports several cryptocurrencies, including Bitcoin, Ethereum, XRP, Litecoin etc.,
Even though Coinbase is not the first cryptocurrency-based business to go public per se, it will be the first of its size to test the public market. After becoming the first crypto unicorn in 2017, Coinbase now has over 35 million users and more than $25 billion in assets on its platform. Based on trading figures, Coinbase Pro is North America’s biggest crypto exchange.
Amid Bitcoin’s Rising Popularity
This announcement by Coinbase is coming at a time when the price of Bitcoin is touching record highs. Bitcoin prices crossed the $20,000 milestone for the first time last week due to increasing interest from larger investors.
Large hedge funds and publicly traded companies are the ones behind this surge. With more and more large players taking part in cryptocurrency transactions, the price of virtual assets such as Bitcoin is rallying.
But why does this matter? Because Coinbase’s fortunes are completely tied to the price of Bitcoin. It might sound like a good thing because as long as Bitcoin surges, Coinbase will have a good run too. According to an earlier Bloomberg report, the firm had $17 million in revenue in 2016, and it surged to $923 million by the end of the next year due to rising prices for cryptocurrencies.
However, think about the other side. What if the price of Bitcoin crashes? When prices of Bitcoin declined, Coinbase’s revenues and operations fell too. The company is predicted to have made $520 million in 2018 and laid off 30 employees, closing its Chicago office. As the prices of Bitcoin continued to stay low, the company laid off more people in 2019. In the same year, the firm’s UK division announced a significant plunge of 22.5% in profits from the previous year. You get the idea: Bitcoin rallies, Coinbase mints money, but it suffers extensively when the former goes through a tough time.
Zooming Out
The IPO of Coinbase is definitely a big moment for the Crypto world, and if it gets the approval from the SEC, it will be a massive victory for all the cryptocurrency enthusiasts. Due to cryptocurrencies’ volatile nature and the possibility of them being used for illegal activities, many tend to avoid trading in crypto assets. However, if the company lists in the exchanges, it will allow investors to take part in the digital market without taking an active stake in the assets themselves.
So, this makes us wonder — Will cryptocurrencies be finally accepted with open arms by the world or will Coinbase’s IPO get rejected and the world continues to hate bitcoin for years to come? That’s a question we definitely want to know the answers to.
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