Coinbase’s upcoming direct listing will make it the first cryptocurrency exchange to go public. This listing has been described as an “Amazon moment” by analysts from D.A Davidson.
The company’s valuation is set at $100 billion, based on its secondary market price at $373 a share. This would make it the biggest listing for a tech company since Facebook.
Analyst Gil Luria from D.A Davidson told CNBC that with this listing the cryptocurrency market and stock market will become intertwined.
“It’s going to become clear that crypto is a giant asset class with a Trillion Dollars, is very relevant to the future of the delivery of financial services, and Coinbase is going to present that moment to the marketplace,” said Lucia.
Luria’s confidence in Coinbase’s success lies in its diversification. He explained that it’s diverse coin offerings means that investing in the exchange itself lessens the risk for the investor, in comparison to investing in one coin market like bitcoin.
While Luria presented an encouraging outlook, he did note that the volatility of cryptocurrency markets is likely to play a role in the price of Coinbase stock.
Bitcoin outshines Big Tech Stocks
The biggest tech stocks, Facebook, Apple, Amazon, Netflix, Google (FAANG) had a good run in 2020 but were no match for Bitcoin. The cryptocurrency outpaced the year-to-date returns of many of these big names, even Amazon. Overall, Bitcoin outperformed the S&P 500 by 1600% in 2020, according to data from Forbes.
This bodes well for Coinbase’s stock market entrance. Not only is it coming onto the market with significant hype and a great reputation, but the performance by Bitcoin and cryptocurrency pumps could also translate into impressive stock performance. Since Coinbase is a company invested in the trade of Bitcoin, positive movements in this trade reflect well on the company and public confidence in it.
However, on the flip side, this could mean that it also is linked to crypto markets volatility. This could make its price vary more than its tech company counterparts.
While FAANG has to worry about poor returns and public scandals shaking confidence in their performance, Coinbase has a myriad of cryptocurrencies to concern themselves with as well. Major crashes in the Bitcoin price or stumbling blocks like regulatory pushback would likely reflect its stock price.