Money, Money everywhere, it seems these days there is no end in sight for the crushing profits Crypto markets are enjoying. COINBASE has been adding coins left and right in the hopes of attracting more market cap to an already burgeoning market. Most recently, ENJ, 1INCH, OGN, and NKN. Their IPO is slated to drop very soon and many people are waiting in line to pounce on the opportunity, but should you? IPOs are notorious for slamming expectations out of the water in both directions of pricing. More often than not, they tank as initial investors look to get a return on their investment and sell the shares upon opening. With an initial valuation of 100 billion dollars, it seems like a lofty target for them to hit but there are glimmers of hope for them if they keep pace with the DeFi.
Stand Out
The great thing about Crypto is that it has and will continue to defy expectations. Think of the naysayers of crypto, Jamie Dimon, Kevin O' Leary, and others who all have called for crypto's inevitable implosion. If you would have listened to them you would have lost out on a lot of opportunities to make money. That's exactly what this IPO is, an opportunity. Is it overvalued, absolutely, could it smash that valuation and leave critics in the dust with their mouths wide open, without a doubt? Especially if Coinbase does something different, dare I say ICO.
Coinbase stands out against recent IPOs due to the fact it actually generates a profit. Coinbase grew revenue by 139% year-over-year in 2020, and core earnings, under our calculation, improved from -$17 million to $317 million over the same time. In the first quarter of 2021, revenue grew more than 9 time year over year (YoY).
Crushing the Numbers
Take a closer look at some of the highlights for Coinbase's Q1 of 2021. This is a very good sign for the initial outlook of COIN because they absolutely crushed the numbers. Keep in mind, there is a major correlation between Bitcoin an their success right now. With the volatility of Bitcoin and Ethereum, these expectations and outlooks could change rapidly. If this holds true and we enter a bear market any time soon, Coinbase's numbers will inevitably follow suite.
- Verified Users of 56 million (More than Venmo and Cashapp)
- Monthly Transacting Users (MTUs) of 6.1 million (Thats up from 2.8 Million at the end of 2020)
- Assets on Platform of $223 billion, representing 11.3% crypto asset market share
- Includes $122 billion of Assets on Platform from Institutions
- Trading Volume of $335 billion (That's up from 193.1 Billion at the end of 2020)
- Total Revenue of approximately $1.8 billion (Thats up from 585.1 Million in Q4 2020)
- Net Income of approximately $730 million to $800 million
- Adjusted EBITDA of approximately $1.1 billion
Clouds on the Horizon
Everyone must evaluate their own risk tolerance and of course complete their own due diligence when considering these kinds of investment but if Coinbase continues on its path of innovation, I think this could be a very smart play in the short term, again, especially if they pair it with an ICO (look out). Also, consider the fact that coinbase currently holds a growing 11% of the total crypto market on its platform from institutional and retail investors. This is a big deal, and with the right moves, they could harness those idle coins and utilize it to dominate the farming and pool scene.
On the flip side, there are some major long term things to consider as well.
Currently, BINANCE is running away with the market. As of writing this, BNB tops over 85 billion dollars in market cap according to CoinGecko, thanks in large part to its Binance Smart Chain (BSC) and the DeFi options it offers. Coinbase is lagging behind in this department and needs to catch up if it hopes to succeed in the long term. If Binance continues to out pace Coinbase and eventually releases its own IPO, the tables could turn rapidly.
You may also want to consider the amount of decentralized exchanges already eating away at the overall market cap as well. Since Coinbase relies heavily on trading fees, it needs something to counter balance this fact as their take rate on those fees is actually decreasing. If transaction fees are significantly lowered in the future and DeFI is made more accessible through on and off ramps, it could spell trouble for the long term outlook of COIN.
Let me know if you plan on investing in COIN* and what you think the IPO will bring.
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