Coinbase Global Inc listing eyed as key test of crypto market’s staying power

Cryptocurrency trading platform is due to go public on the Nasdaq through a direct listing next Wednesday in what is shaping up to be a blockbuster debut for both the crypto sector and the wider market in general.

The company, which allows users to buy, sell, send and exchange cryptos including Bitcoin, was valued at around US$90bn in private share trading in early March, however, the ongoing boom in crypto trading could see its value surge when trading begins.

READ: Coinbase valuation reaches US$90bn ahead of public listing

The company’s future as a publicly traded firm was also likely given a boost earlier this week when it reported that active users on its platform had surged to 6.1mln from 2.8mln in the fourth quarter of 2020, while verified users, those with Coinbase accounts, jumped to 56mln from 43mln.

Meanwhile, the firm reported that it had raked in US$1.8bn over the period as well as a net income of around US$730-US$800mln.

The company also saw its trading volumes top US$335bn, while the total assets on its platform swelled to US$223bn from US$90bn in the fourth quarter of last year. Around US$122bn of those assets came from institutions, showing the firm has managed to attract professional cash into the crypto market.

READ: Coinbase user numbers soar amid Bitcoin boom

Following the meteoric rise in the value of Bitcoin over 2020 and the first months of 2021, Coinbase’s flotation will be seen by many as a key litmus test of whether the crypto bull run is set to continue into the coming year.

The floatation also comes amid a wider boom in retail stock trading, a trend that was brought into stark relief in late January when a buying frenzy in shares of US video games retailer () was sparked by online retail trader forum r/wallstreetbets.

This trend has already lured other retail trading platforms toward the possible gains of a public listing, with US trading app filing paperwork for an initial public offering (IPO) in late March.

READ: Robinhood files IPO paperwork as it looks to capitalise on retail investor revolution

“With bitcoin already having more than doubled in the last six months and cryptocurrencies becoming more popular with more mainstream investors it can certainly be argued that crypto has become more mainstream in the last 12 months…It’s not just Bitcoin that is proving popular however, there are also a whole host of other cryptocurrencies that are becoming more tradeable with the likes of Ethereum, Litecoin and Stellar Lumens hitting record highs this month”, said Michael Hewson at CMC Markets.

However, Hewson also cautioned whether the valuation of a crypto-focused entity like Coinbase could stand up to pressure in the long-term.

“Will Coinbase prove popular with retail investors?…There is little doubt about that prospect with demand and interest set to be high. The bigger question is whether any valuation is sustainable, particularly given how many governments aren’t particularly enamoured of cryptocurrencies, which means future regulation is likely to be a clear and present danger and a probable headwind”, he said.