What is Coinbase? – a 30-sec rundown
It is a mainly a marketplace for cryptos. It is the second biggest crypto exchange in terms of volume behind Binance. Makes most of the money through commissions. Diversified into other products like stake, store, borrow and lend a couple of years ago. Basically a Fin, Tech and Cyber Sec company, think NASDAQ for cryptos but with NO physical headquarters.
Coinbase was initially co-founded by Brian Armstrong, an ex AirBnB Engg with Ben Reeves, a programmer from UK. It started as a bitcoin holding and payment wallet. Later on Brian ended their partnership as he felt they didn’t work well together. He then graduated Y Combinator as a solo entrepreneur in 2012 and met Fred Ehrsam, a former Goldman Sachs trader with a computer science background, a few months later. In early 2013, they pitched in front of Initalized Capital. Its chief Garry Tan was their first investor. Thereafter, it has raised about $575 million till series E.
It added the second crypto only in 2015 with Ether.
Crypto Boom of 2017
Coinbase, which makes most of its revenue from trading margin, saw its first $1 billion revenue year in 2017 with the crypto boom as against the predictions made in Sept. In just 3 days around the Thanksgiving weekend in Nov 2017, Coinbase added about 100,000 users and btc soared over $9000. By the end of 2017, Btc touched $19000 for the first time, doubling in just under a month!
The Crypto “Winter” Thereafter
The next year, the drop was very apparent. It went all the way near the $3400 level! But the declining btc value did not much affect Coinbase’ valuation. It closed its $300 Series E round in Oct 2020, valued at $8 Billion. This money was utilized to attract more institutional investors and also to introduce new subscription products and services.
For most of these products and services, such as Store, Save, Stake, and Borrow & Lend, we generate revenue based on a percentage of the assets on our platform participating in the product or service. As a result, we believe growing Assets on Platform will drive growth in subscriptionCoinbase S-1 filing
2020 – ’21
This was the best year for crypto until now. Bitcoin and Ether have surged 800% and 1,300% respectively in the past year. Coinbase t had 43 million users by the end of 2020 and 56 million by the end of Q1 2021. It released its Q1 results on 6th April, about a week before its listing on the NASDAQ. It was as good as it could get.
|Year ended 31/12/2019||$522 Million||($30 Million)|
|Year ended 31/12/2020||$1.2 Billion||$322 million|
|Q1 2021||$1.8 Billion||$800 Million|
In just Q1 2021, it raked in more revenue than the whole of both the previous years, largely due to the higher btc trading possibly because of the Dec 2020 Stimulus announcement and the rising bond yields.
Coinbase opted for a direct listing like some other companies who knew their shares would be easily sold. Direct listing does not involve investment banks like traditional IPOs. The companies just directly list the shares where the existing shareholders sell a part of their stake. Other notable companies that went with direct listing are Spotify and Palantir.
The reference price was set at $250 by NASDAQ. The shares opened at $381, a 52% premium on the reference price, and quickly shot up as high as $429.54, before dropping back below the debut price and reaching a low of around $310. At it highest, Its Market Cap breached $100 billion mark and later settled at about $85 billion.
The listing of Coinbase is an important milestone for Crypto – BTC touched all time highs on its listing reflecting the fact. It gives an opportunity for funds looking to invest or take a position in crypto, a way to do so by buying $COIN shares.
Though the numbers will wax and wane according to the price of cryptos, Coinbase might be the one taking crypto mainstream and building a cryptoeconomy just like Amazon bringing about the e-bookstore or Google making it in the Internet space back in the day.
This will lead to a period where crypto companies will just be called companies, like the transition to internet companies being called just companies with the listing of Google at the end of the Dot-com boom.