Coinbase IPO Valuation: The Numbers Behind the Buzz
Take a look behind the scenes of the Coinbase IPO
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Hey DEFI TIMES community,
Coinbase went public on April 14, with its shares opening at $381 on the Nasdaq stock exchange under the ticker symbol COIN. The listing has been spectacularly successful - for a short moment of time, the whole world appreciated how far crypto has come.
Coinbase launched in June 2012. Almost nine years later, it has grown into a multi billion dollar company, which is valued more than most of its TradFi competitors.
The IPO made many people filthy rich - most of all Brian Armstrong, who is estimated to have a net worth of over $10 billion. But don’t forget about all the other early investors, risk takers, and employees, who all got the chance to have a share of the company.
The Coinbase listing was a historic event. It legitimized the crypto markets because the whole world realized that this space is more than just speculation.
But how does Coinbase actually do? What do their numbers say?
Let’s take a look behind the scenes of the Coinbase listing and study the fundamentals of the company beyond all the buzz and hype.
Let’s dive into it!
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The Numbers Behind the Coinbase IPO
Let’s begin with the most obvious metric of them all: the company’s valuation. The market ultimately determines whether Coinbase is valuable or not - that’s why it's important to analyze how the market values Coinbase before and after the public listing.
As you can see, this chart tracks Coinbase’s valuation immediately before and after the IPO. Just before the public listing, Coinbase was valued at around $100 billion. Just on the day its shares were issued, the valuation sank to around $60 billion.
That doesn’t mean the IPO was not successful - quite the opposite is true!
Interestingly, we can compare Coinbase’s launch to a popular experiment done with monkeys: We have two monkeys. Monkey 1 gets one banana and is happy about it! Monkey 2, on the other hand, receives two bananas. Shortly after, we take away one banana from monkey 2.
In the end, both monkeys end up with one banana, but which one do you think feels better?
Just as the monkey experiment, Coinbase had a tremendous launch, even though the valuation had a significant dump on the launch date.
With a valuation of $60 billion dollars, Coinbase is one of the largest companies in the world. It’s the first crypto company to achieve this status!
What’s more important than a company’s valuation? Right, it’s customers. Without customers, there’s no revenue; hence, the company is worthless.
That’s why the world’s richest man, Jeff Bezos, is obsessed with Amazon’s customers: Always put the customers first!
But luckily, Coinbase’s user base grew significantly, especially throughout 2020.
In Q1 2021, Coinbase’s total user base grew by 30%, totalling 56 million unique users!
Coinbase is basically the go-to platform for crypto newbies. Its user friendliness, simplicity, and network effect make it easy for anyone to buy their first cryptocurrencies. That’s why almost 13 million new users joined Coinbase from January to March 2021.
Let’s see how the rest of 2021 will look like!
But how many Coinbase users are actively trading/transacting? You can have millions of sign-ups but if nobody is using your platform, your company has problems.
Luckily, Coinbase could double its active users in Q1 2021. It now has over 6 million transacting users!
Coinbase is not only an exchange, it’s also a bank. Therefore, it offers custody services - storing their customer’s funds in cold and hot storages.
This metric is a good indicator of how much trust users put into the company. Would you store your wealth in a bank you don’t trust?
Coinbase holds your private keys for you - if you hold your funds at Coinbase, you outsource the responsibility of having to hide/remember your keys.
Apparently, users put as much trust in Coinbase as never before.
By the end of Q1, Coinbase stored over $220 billion worth of cryptocurrencies in the cold and hot wallets. Think about it! That’s around 10% of the whole cryptocurrency market cap!
That makes Coinbase by far the largest crypto custody firm in the world!
Now let’s get to Coinbase’s true business purpose: Exchange volume. Throughout 2020, Coinbase made a total of $192 billions trading volume!
Only in Q1 2021, the trading volume exceeded the 2020 volume by far: $335 billion - pretty remarkable! Only in three months, the trading volume surpassed the previous 12 months by a lot!
And now comes the interesting part: By the end of 2020, only 35% of the Coinbase trading volume was from retailers. That means 65% of the training volume came from institutional investors.
Back in 2017, the retail share was as high as 80% - times change!
Because Q1 2021 was the best quarter ever for Coinbase, the revenue also shot through the roof: it exceeded $1.8 billion!
Coinbase’s fundamentals look as great as never before. The company crossed one all-time high after another just before its IPO. To summarize:
It’s now valued at $60 billion dollars - an annualized P/E of 8.3!
56 million users signed up on the platform
6 million people are actively using the platform
$220 billion worth of cryptocurrencies in the cold and hot wallets - that’s 10% of the whole crypto market cap!
Q1 trading volume exceeded $335 billion, from which the majority is likely institutional
Revenue in Q1 totalled $1.8 billion
The Coinbase’s IPO is not only buzz and hype - and the valuation isn’t even astronomical (as many people believe), it’s actually quite… reasonable!
Let’s see what the future holds for Coinbase!
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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.
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