The largest American platform for buying and selling cryptos and bitcoin could reach an astronomical valuation of 28 billion dollars during its IPO. Its entry on Wall Street would benefit from the surge in the markets and the explosion in volumes over the past year.

After a record at 24,273 dollars (19,895 euros), bitcoin continues to ignore the laws of gravity. The euphoria in the crypto market is fueling higher volumes – record activity was recorded on December 17 – and profits for bitcoin exchanges. For the first time, one of them wants to be listed on Wall Street.

Coinbase, the largest US crypto trading platform and the second largest in the world behind Binance, has confirmed that it is considering an IPO. It has started the process with the US market regulator, the Securities and Exchange Commission (SEC). Its leader Brian Armstrong is a former Airbnb. Will Coinbase's IPO be as successful as that of the leader in the rental of housing between individuals? If successful, other crypto platforms could follow the same path.

One in three crypto users is on Coinbase

Coinbase has 35 million customers in around 100 countries, or nearly one in three crypto users worldwide. In a fragmented sector with 300 crypto and bitcoin exchanges, the first of the American platforms estimates that its customers have entrusted it with $25 billion in bitcoins, cryptos and cash. The company did not disclose revenue or profitability figures. Its valuation had been multiplied by 5 between the summer of 2017 and October 2018 to 8 billion dollars when it called for external financing. Over the past two years, the price of bitcoin has multiplied by more than 6. Transaction volumes and commissions have exploded on crypto exchanges, with a new record on December 17. Coinbase was processing around $1 billion a day in December, 5 times more than the year before.

“Most of the volumes come from institutions, but the majority of customers, in number, are individuals. 90% of Coinbase's activity comes from transactions between cryptos and traditional currencies, and 10% from transactions between cryptos. She predicts that Coinbase's valuation could reach $28 billion upon its IPO, if market conditions remain favorable. The FTX platform has just launched a contract to bet on the value of Coinbase stock. The market estimates that the market capitalization of the platform will be $58 billion, according to the news site dedicated to cryptocurrencies “The Block”. Brian Armstrong and the other significant shareholders of the platform (private equity funds, Coinbase employees, etc.) will hit the “jackpot”.

Coinbase correlated to bitcoin

After its entry on Wall Street, the price of the platform should be correlated with that of bitcoin. When the latter progresses, new investors and speculators are interested in it, the volumes increase and Coinbase takes advantage of it. Conversely, in 2018, during the great price correction, activity fell on the platforms. If bitcoin goes through another prolonged downturn, Coinbase's price should drop too.

Founded in 2012 by Brian Armstrong and Fred Ehrsam, a former Goldman Sachs trader, who then created his own company (Paradigm), the San Francisco-based platform quickly brought itself into regulatory compliance with the American authorities. It now operates in 44 American states and in New York from 2017. The price of success and the influx of customers (13,000 per day), users are sometimes deprived of access to the platform for several hours. Some believe that they have lost money because of these types of incidents.

Volatility

In a blog published before the announcement of the IPO project, Brian Armstrong recalls “that investing in cryptos is not without risk”. “The period is not only one of high volumes but also of price volatility. Cryptos can be a volatile asset class, often much more so than other instruments investors are used to. Volatility also attracts many speculators looking for easy money and thrills. The platform believes that investor education is not its responsibility and refers its clients to financial advisors “to better understand the risks associated with investing in cryptos”.