Future Tense

Coinbase Went Public. What—and Why—Is Coinbase?

A cryptocurrency company is now worth $85.8 billion. Yes, there are some things you should know.

This illustration photo shows the Coinbase logo on a smartphone.
Coinbase went public on Wednesday. Chris Delmas/AFP via Getty Images

The United States’ biggest exchange for digital tokens like Bitcoin is now worth a whole lot of real dollars, too. Coinbase, a trading platform for cryptocurrency, debuted on the Nasdaq on Wednesday. The moment had been hyped as a milestone for cryptocurrency’s acceptance by financial institutions and the general public, as Coinbase is the first major crypto company to go live on a U.S. stock exchange. Here’s what you need to know about how Coinbase did, how this purportedly legitimizes cryptocurrency, and what all the memes are about.

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What is Coinbase?

Coinbase is an online platform where users can buy and sell any number of cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. It’s the country’s largest cryptocurrency exchange and was founded in 2012 by entrepreneurs Fred Ehrsam and Brian Armstrong, who currently serves as the company’s CEO. In the early years of Bitcoin, it was pretty much impossible for people without coding expertise to use the currency; Coinbase’s goal was to provide laypeople with a more accessible platform. It now has about 56 million verified users and had a trading volume of $193 billion in 2020. As it’s grown more prominent, Coinbase has also had some controversies, including last summer when Armstrong faced backlash for refusing employees’ requests to support Black Lives Matter last summer.

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So how’d it go?

COIN opened at $381 per share, hit a high of $429.54, and then closed at $328.28, giving it a valuation of $85.8 billion, which rivals those of Facebook and Airbnb during their debuts. The Nasdaq had previously given Coinbase a $250 reference price. Coinbase opted to pursue a “direct listing,” which means that the company did not get banks involved in underwriting and is allowing early investors to convert their stakes into shares that they can trade on the market. Though uncommon, the practice has become trendy among big tech companies like Spotify and Slack, in part because it allows less public scrutiny in the run-up to a market debut.  Coinbase is the biggest company ever to go public with a direct listing.

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Crypto stills feels sketchy to me. Is this stock sketchy?

Unlike a number of other major tech companies, Coinbase is going public while also posting profits. It raked in revenues of $1.28 billion in 2020, from which it made a $322.3 million profit. Companies that go public without a clear path to profitability—like Uber, Lyft, Snap, and Twitter—will often see their shares tank after the initial investor excitement wears off. Coinbase also happens to be riding a growing interest in crypto among the public, as well as a growing footprint in the tech industry. For instance, Elon Musk recently directed Tesla to purchase $1.5 billion in Bitcoin, which has been reaching record price highs as of late, and NFT art—a (depending on who you ask, possibly stupid) kind of crypto token—is making a big splash. At the same time, Coinbase’s revenue is, for better or worse, wedded to the notoriously volatile prices of cryptocurrencies. As the company noted in its SEC filing, “Our net revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected.” Coinbase may also be seeing a lot more competition in the new future, with financial giants like Fidelity also looking into forming cryptocurrency trading businesses. New entrants may force Coinbase to considerably lower its transaction fees, which accounted for 96 percent of its sales in 2020, though Armstrong says he is aiming to make it only 50 percent by diversifying the business in the next five to 10 years.

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So maybe this will make crypto … less sketchy?

That’s the idea. “Hopefully Coinbase going public and having its direct listing is going to be viewed as kind of a landmark moment for the crypto space,” Armstrong said in an interview. Institutional financial players like Fidelity, JPMorgan, and Goldman Sachs have been making inroads into the space, and Coinbase’s arrival on the Nasdaq could be yet another step toward Wall Street embracing cryptocurrency, though there’s still a healthy amount of skepticism among some analysts that the market won’t implode. For the time being, though, it allows investors who might not normally touch cryptocurrency get some indirect exposure to industry. It could even inspire some of those investors, who might see Coinbase’s debut as an extra layer of validation for cryptocurrencies in general, to also become involved in the market. Bitcoin notably reached a record price of $62,741 on Tuesday, a feat no doubt linked to the Coinbase listing. Ethereum also reached a high of $2,205.

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How have cryptocurrency enthusiasts reacted to the news?

Overall, the meme-loving cryptocurrency community seemed fairly jazzed about the whole affair, though some were perturbed by the idea of people buying shares of Coinbase rather than the cryptocurrency it sells. Here’s a selection of reactions from crypto enthusiasts:

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Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.

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