Coinbase is one of the largest cryptocurrency exchanges in the world and one of few authorized by the U.S. government. And it’s taking things a step further in 2021 by preparing for an initial public offering (IPO).
This makes it the first major Bitcoin-related company to go public and has crypto-savvy investors wondering how to buy Coinbase stock.
It’s one more step in cryptocurrency’s mainstream adoption and follows on the heels of financial companies like PayPal (PYPL) and USAA supporting the industry. In fact, you can now link your Coinbase account to USAA and view them together.
That’s a scene that early Bitcoin adopters dreamed of, and the 2020 volatility made market sentiment clear. While legacy financial companies like Wells Fargo & Co (NYSE:WFC) struggled and failed to recover to pre-pandemic trading levels, Bitcoin and other cryptocurrencies reached historic highs.
But crypto is a notoriously unstable market with rapid price swings and projects being shut down overnight. It’s time to check the digital ledger on Coinbase to determine if its IPO is worth the hype in 2021.
Is Coinbase Publicly Traded?
Coinbase is not currently publicly traded as of January 2021, and it doesn’t have its own cryptocurrency token like its competitors.
If you wanted to invest in Binance, for example, you could simply buy the Binance Coin BNB cryptocurrency token, which is the native coin on Binance Chain.
The company’s value was estimated at $8 billion in October 2018. This is after it raised $300 million in a Series E investment round. This means the company raised $525 million from investors before going public.
It also debuted a new feature in August to offer bitcoin-backed loans. This trading option lets customers access liquidity from their crypto holdings while retaining the HODL (hold on for dear life) mentality crypto’s most diehard fans and believers spout.
So, when can you get in on the action?
When Will Coinbase IPO?
Coinbase filed its draft registration Form S1 for an IPO with the U.S. Securities and Exchanges Commission (SEC) in mid-December 2020. The company announced it on its Twitter account the morning of December 17.
This doesn’t mean the company will be approved – it’s simply the application for the SEC to scrutinize. And it’s certainly expected to do so.
The SEC has a long, rocky history with cryptocurrencies and spent much of the last decade seemingly working against the industry. In the 2010s, crypto projects eschewed conventional Wall Street investments using an initial coin offering (ICO) instead.
ICOs, like IPOs, crowdsourced large investments through traditional and social media hype. These valuations often didn’t hold up, and many of the projects still don’t have mass adoptions. Although whitepapers prove use cases, customers and revenue ultimately matter.
The SEC’s ICO crackdown also extended to exchange-traded funds investing in Bitcoin, Ethereum, and other projects. By 2020, the agency (and government regulators around the world) held hot debates over which cryptos are securities, commodities, and currencies.
An exact Coinbase IPO date can’t be set until the SEC approves its application. If it is approved, expect the company to react swiftly while the crypto and IPO markets are still hot.
How To Buy Coinbase Stock
Right now, the only way to “invest” in Coinbase is to park your money with them. The company has several options through its wallets that allow customers to generate income from their crypto holdings.
However, any savvy crypto investor (or legacy investor for that matter) is aware of blockchain voting rights. As of the end of 2020, there’s no way via either crypto token or security to buy shares in Coinbase.
And whether they issue stock shares or crypto tokens is going to be a hotly debated issue. The crypto community believes security token offerings (STO) are the way to bridge the gap between legacy and crypto assets.
But, again, the SEC is not keen on the speculative nature of Bitcoin and other crypto projects. The agency believes (with good cause) the market is too easily manipulated. In fact, let’s dive into the stigma of cryptocurrency exchanges.
Is Coinbase a Good Stock to Buy?
Although it wasn’t trading publicly, the value of Coinbase increased with the value of Bitcoin and other cryptocurrencies in recent years. Analysts estimate the crypto asset exchange is worth $28 billion, and the IPO could raise that price.
Whether it’s an STO, ICO, or IPO, Coinbase going public is a big deal that will generate a lot of investor interest. It could be a good or bad thing, depending on when you invested.
The price of Bitcoin skyrocketed in the 2020 holiday season and remains in 2021 above its previous historic high of $20,000 per coin. But the last time was proven to be caused by price manipulation by a rival cryptocurrency exchange in partnership with the Tether cryptocurrency.
Going back to the early Bitcoin days, Mt. Gox is one of the most infamous crypto exchanges to be shut down by the government. At the time it handled over 70 percent of BTC transactions, and most people still haven’t recovered the money locked in their exchange wallets to this day.
In fact, an estimated 3.7 million Bitcoin are forever lost. That’s approximately $111 billion just sitting around forgotten. These underlying risks make Coinbase a risky stock that’s likely to be overvalued through the internet hype machine.
How to Buy Coinbase Stock: The Bottom Line
Coinbase is the largest cryptocurrency exchange in the United States and has a solid tech footprint. One thing it doesn’t have is its own coin, and unlike typical cryptocurrency projects that launch with ICOs and STOs, Coinbase wants to go public as a security through the SEC.
It filed its paperwork in December 2020, but the application is yet to be approved by the SEC. There’s a reasonable chance it could run into challenges, but it’s also in a great position to profit from the pandemic economy.
IPOs and cryptocurrency have a reputation for high risk, but exchanges aren’t tied to any one coin. The company arguably grew 3x over the past three years and early investors could make a mint if the SEC approves.
But it’s a big IF.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.