The Bitcoin hype has reached a new high: On Wednesday, the largest US trading platform for cryptocurrencies celebrated its stock exchange debut on the Nasdaq. Share prices shot up.
What Apple is in the mobile phone industry and Amazon in online trading, that should be Coinbase in the cryptocurrency scene. At least that’s what Thomas Rappold, financial expert for the tech industry and author of numerous books on technology stocks, thinks. On Coinbase, 56 million investors buy and sell around 50 different crypto currencies – from Bitcoin to “SushiSwap”. An estimated eleven percent of the market flows through the platform. Coinbase is one of the biggest beneficiaries of the current Bitcoin boom. No wonder the crypto heavyweight’s IPO caused a stir on Wall Street today. Investors fought for stocks. The initial price was $ 381 – $ 131 above the reference price of $ 250. This corresponds to an increase of a good 52 percent.
Worth more than the New York Stock Exchange
Thus, the crypto trading platform is now worth almost $ 100 billion more on the stock exchange than any other exchange operator. For comparison: The operator of the New York Stock Exchange, the Intercontinental Exchange, currently only has a market capitalization of just under $ 66 billion. Some analysts believe that price soaring will continue on the first day of trading. They think a valuation of $ 100 billion to $ 170 billion is possible.
From the niche to the Wall Street mainstream
The first IPO of a company whose business model is based purely on trading cryptocurrencies is a satisfaction for many fans of cyber currencies. You will see the listing as a Milestone for Bitcoin & Co . on the way to the Wall Street mainstream. “As of today at the latest, Wall Street can no longer ignore cryptocurrencies,” said expert Timo Emden from the analysis company Emden Research. Coinbase is currently highly profitable. In the first quarter, the profit should have been between 730 and 800 million dollars, the platform operator recently announced. Sales even climbed to $ 1.8 billion. The number of users more than quadrupled in the first three months of this year – from 13 to 56 million.
Depending on the Bitcoin rate
The trading platform mainly earns its money through fees. The higher the price of Bitcoin & Co. rises, the higher the fee. Accordingly, business is currently booming. The price of Bitcoin has increased almost tenfold within a year – from $ 6,500 to almost $ 65,000. A new record of $ 64,899 was hit on Wednesday. But the profitability of Coinbase stands and falls with the rates and trading volume of cryptocurrencies. If a crash occurs, for example in 2018, when the Bitcoin rate fell by over 70 percent and other cyber currencies such as Ethereum even more sharply, Coinbase’s business also collapses. “We can also make money,” admits Coinbase co-founder and CEO Brian Armstrong. The business model is therefore extremely prone to fluctuations.
Fee pressure is likely to rise
Should the competition increase further and the crypto rush evaporate, the fees of the trading platforms could also come under pressure – similar to the last one with online brokers or the operators of share trading apps. Especially smaller of the more than 200 crypto exchanges are trying to attract customers with lower fees. The PayPal group, which has now also started trading Bitcoin, could further fuel competition. Experts see regulation as a further risk. Jesse Powell, head of Coinbase competitor Kraken, recently warned on CNBC that governments would crack down on digital currencies – whereby criminals like to use cryptocurrencies. Coinbase is trying everything to avoid ending up in this dirty corner. The company sent its managers to the FBI and the Secret Service to explain to them that Coinbase was not an Eldorado for money launderers and drug dealers.
Safe from total loss?
The best Regulation in this country offers protection against a total loss of the investment , says Philipp Sandner, Head of the Blockchain Center at the Frankfurt School of Finance. In addition to three other trading platforms, Coinbase has applied for a license from BaFin. The cryptocurrency industry is also not immune to the risk of hacker attacks. In 2013, hackers stole millions on various crypto exchanges. Coinbase claims it has never been hacked. The entrepreneur secures his customers’ money by mainly keeping the key codes separate from the internet.
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