Coinbase's blockbuster debut is a 'watershed' for crypto — but there are risks ahead

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Coinbase is set to go public through a blockbuster direct listing Wednesday, and investors are hailing it as a “watershed” moment for the cryptocurrency industry.

The digital currency exchange could be valued at as much as $100 billion, making it more valuable than major trading venue operators like New York Stock Exchange parent Intercontinental Exchange and Nasdaq.

It comes as the prices of bitcoin and other virtual currencies have soared over the past year, as investors looked to diversify their portfolios in the belief that a spike in inflation is coming. Bitcoin hit a fresh record high of more than $64,000 on Wednesday and has more than doubled in value year-to-date.

Coinbase’s public market debut is “potentially a watershed event for the crypto industry and will be something the Street will be laser focused on to gauge investor appetite,” said Dan Ives, a tech analyst at Wedbush Securities.

“It’s going to legitimize a lot of what these companies are doing,” Marcus Swanepoel, CEO of London-based crypto platform Luno, said of the Coinbase debut. “For one, it’s going to show just how big the industry is and how much it’s growing.”

Coinbase is the largest cryptocurrency company to go public so far. It’s the world’s second-largest digital asset exchange by trading volume, according to CoinMarketCap, and has been credited with bringing crypto into the mainstream with its easy-to-use app.

But there are a number of risks ahead. Cryptocurrencies are notorious for their wildly volatile price moves, and skeptics think it may be in a massive market bubble that’s bound to burst at some point. Meanwhile, global regulators are increasingly trying to bring crypto under their oversight, with India’s government even looking to ban digital currencies.

Volatility

Coinbase estimates it made $1.8 billion in revenue in the first quarter of 2021, a whopping 844% increase compared to the $190.6 million it generated in the same period a year earlier. That was largely thanks to the huge jumps in price from digital coins like bitcoin and ether.

Given Coinbase’s business is heavily tied to the performance of major cryptocurrencies, there’s a risk that momentum could swing the