Bitcoin hit a record high on Tuesday, rising as high as $63,179, extending a year-long surge of more than 800 percent.
On the news, Coinbase, the world’s largest cryptocurrency exchange, will ring the bell on the Nasdaq exchange on April 14 under the ticker symbol “CON”. Market analysts believe that Coinbase’s IPO will provide more official recognition for the industry.
As the first cryptocurrency exchange to go public, Coinbase’s IPO is not a traditional IPO, but rather a direct listing, where funds are raised through the sale of new shares, and a direct listing, where existing shareholders can sell their shares without selling new shares.
In terms of valuation, exchange filings show that Coinbase is worth $91.5 billion on a fully diluted basis, based on the price the company paid in private market transactions earlier this year. Outsiders expect the company’s valuation to increase further along with a big jump in bitcoin prices in the first quarter of this year.
Coinbase’s quarterly report released this month showed that the company reached 6.1 million monthly trading users (MTUs), with 56 million verified users and 13 million new users in the first quarter. The company traded $335 billion in the first quarter, with overall revenue of about $1.8 billion and profit of $730 million-$800 million. Even at the low end of that range, the company’s profit for the quarter was more than double that of all of last year.
Coinbase makes money by charging users a fee when they buy or sell cryptocurrencies. While the company doesn’t bet directly on bitcoin, its shares could be affected if bitcoin crashes and causes its trading volume to decline.
In the past year, 96 percent of the company’s net revenue came from transaction fees. The company charges high fees compared to other crypto exchanges. If an investor wants to buy $100 of bitcoin on Coinbase at the prevailing market price, they will have to pay about $3.49 in fees, which can be higher if they use other payment methods such as debit cards. On rival exchange Kraken, the same investor would pay a fee of $1.50. At another competitor, Bitstamp, the fee would be 50 cents.
The dilemma for investors, market analysts say, is whether the company’s current strong performance will continue in the future. Based on the low end of the company’s first-quarter results, the company’s price-to-earnings ratio calculated on 12-month expected profits is about 90 times. By comparison, the New York Stock Exchange parent Intercontinental Exchange (ICE) has a P/E ratio of about 31 times, and Nasdaq has a P/E ratio of about 27 times based on 12-month expected profits.
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