After months of anticipation, the leading cryptocurrency exchange Coinbase has officially confirmed its plans to go public. According to a report from The Block, the company will pursue a direct listing on the Nasdaq exchange. This move marks a significant milestone not only for Coinbase but for the entire cryptocurrency industry.
Coinbase initially filed a draft registration statement with the U.S. Securities and Exchange Commission (SEC) in December of last year. On January 25, the Nasdaq Private Market opened a secondary market for Coinbase stock, enabling vested shareholders to sell their shares. In the coming weeks, the company is expected to conduct a secondary public offering on the same platform.
Insiders revealed that shares were priced at $200 on the Nasdaq Private Market. With 254 million outstanding shares, this would value Coinbase at approximately $50 billion. However, according to futures data, the current price sits at around $288 per share, implying a valuation closer to $73 billion.
This development positions Coinbase to become the first major cryptocurrency exchange to go public. The announcement has already positively impacted the market, with Bitcoin breaking through $35,000 and major altcoins like Litecoin (LTC), Ethereum (ETH), and SUSHI recording gains exceeding 10%.
How Does a Direct Listing Differ from an IPO?
Under the leadership of CEO Brian Armstrong, Coinbase has evolved into one of the most prominent crypto enterprises globally, having raised over $500 million from investors like Andreessen Horowitz and Polychain. The decision to pursue a direct listing follows a rule change by Nasdaq in August of last year, which allowed companies to use this method as an alternative to a traditional Initial Public Offering (IPO).
Unlike an IPO, a direct listing does not raise new capital. Instead, it converts existing company shares into publicly traded stock, bypassing the substantial fees typically paid to investment banks. Another key advantage is the absence of a lock-up period, allowing early investors to sell their shares immediately upon listing.
Other alternatives to traditional IPOs include reverse mergers (backdoor listings) and Dutch auctions, famously used by Google. Prominent venture capitalists, such as Bill Gurley from Benchmark, have criticized the traditional IPO structure. They argue that it allows banks to offer shares at a discount to preferred clients, who then profit when trading begins. Many consider this model inefficient and outdated, advocating for methods that enable early investors to liquidate holdings without enriching middlemen.
By choosing a direct listing, Coinbase achieves a significant corporate victory. This approach is increasingly seen as a mature alternative to IPOs, with other major companies like Spotify having successfully taken this route on the New York Stock Exchange.
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Implications of Coinbase’s Public Listing
As one of the United States' top digital currency platforms, Coinbase’s greatest strength lies in its compliance-first approach. Its last private valuation in 2018 was $8 billion. However, crypto analysis firm Messari estimates that the public market valuation could reach $28 billion, based on an analysis of Coinbase’s diverse business units, including trading, custody, and debit card services.
The exchange has expanded its influence through several high-profile acquisitions. Recently, Coinbase acquired blockchain infrastructure provider Bison Trails. In January, it also purchased the Routefire platform, significantly enhancing its trade execution capabilities.
With a trading volume exceeding $320 billion and a user base of over 35 million, Coinbase’s path to going public seemed inevitable. Its successful listing could pave the way for other cryptocurrency firms to enter public markets, solidifying the industry’s place in mainstream finance in 2021.
The Rising Challenge to USDT’s Dominance
While Coinbase makes headlines, significant shifts are occurring in the stablecoin market. USD Coin (USDC), a stablecoin pegged 1:1 to the U.S. dollar, was launched in 2018 by Circle, a blockchain-focused financial services provider.
Circle holds the most regulatory licenses in the crypto asset industry, including approvals from U.S. regulators (such as New York’s BitLicense), the U.K., and the European Union. This grants it compliant channels for converting U.S. dollars, British pounds, and euros into crypto assets. In terms of transparency, Circle states that USDC reserves are audited monthly by top accounting firms and made public.
The rapid growth of decentralized finance (DeFi) in 2020 provided a significant boost to USDC. Data from Skew shows that USDC’s market capitalization has grown by 50% since the beginning of 2021. It is now rapidly eroding the dominance of Tether (USDT), the long-standing industry leader.
A Glassnode report from February 1 indicates that the amount of USDC held on exchanges grew by over 112% in January alone, rising from $431 million to more than $915 million. Since the start of the year, approximately $1 billion worth of USDC has been issued, with over 90% of it sent to centralized exchanges.
Glassnode analysts suggest that nearly a billion dollars entering exchanges in a month could indicate that traders are preparing to buy cryptocurrencies, potentially signaling market confidence and a bullish outlook.
Circle attributes January’s growth to the seamless transferability between USDC and U.S. dollars. Since the beginning of 2020, the supply of USDC has surged by over 900%, from just over 500 million to 5.1 billion. In comparison, Tether’s circulating supply increased by about 500% over the same period. However, Tether’s recent capital increases have been more than four times larger than USDC’s growth in the past 13 months.
Tether has faced its share of challenges. In April 2019, New York prosecutors accused Tether of market manipulation and froze related accounts, causing USDT’s price to drop panicially by over 6%. The situation stabilized only after Bitfinex, Tether’s sister company, raised capital through the issuance of its LEO token.
As a centralized stablecoin, USDT faces inherent risks, including the possibility of operational failure or bankruptcy, since its issuance and storage are controlled by Tether Limited. USDC was designed to address these very concerns by offering greater transparency and regulatory compliance.
According to Debank data, USDT’s share of the stablecoin market has fallen to below 58.47% as of February 2, while USDC has been on an upward trend, now accounting for 22.5% with a circulating supply of nearly $6 billion.
Recent legislative discussions in the U.S. regarding the "Stable Act" could further impact the stablecoin landscape. If passed, the bill would require stablecoin issuers to obtain banking charters, undergo audits by the Federal Reserve, obtain insurance, and potentially hold reserves at the Fed. Such regulations could place additional pressure on Tether while benefiting fully compliant players like Circle.
In the future, USDC is poised to become USDT’s most significant competitor and could potentially overtake it as the leading stablecoin.
Frequently Asked Questions
What is a direct listing?
A direct listing allows a company to go public by listing existing shares directly on a stock exchange without issuing new shares or hiring investment banks as intermediaries. It avoids underwriting fees and lock-up periods, providing immediate liquidity for early investors.
Why did Coinbase choose a direct listing over an IPO?
Coinbase opted for a direct listing to save on banking fees, provide immediate liquidity to shareholders, and avoid the traditional IPO process, which some consider outdated and skewed in favor of institutional investors.
How does USDC differ from USDT?
USDC is issued by Circle, a highly regulated financial company that undergoes regular audits and provides full transparency. USDT, issued by Tether Limited, has faced scrutiny over its reserve audits and centralized control, creating higher perceived risk.
What impact could Coinbase's listing have on the crypto market?
As the first major crypto exchange to go public, Coinbase’s listing lends legitimacy to the entire industry. It could attract institutional investment and encourage other crypto firms to explore public listings.
Is USDC safer than USDT?
Many consider USDC safer due to its regulatory compliance, regular audits, and transparent operations. USDT’s centralized structure and past legal issues contribute to a higher risk profile.
What is the "Stable Act" and how might it affect stablecoins?
The Stable Act is a proposed U.S. law that would require stablecoin issuers to obtain banking licenses and comply with federal banking regulations. If enacted, it could pressure less transparent issuers like Tether while benefiting compliant ones like Circle.