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  • The 2021 crypto frenzy has hit a new milestone with major crypto company Coinbase’s turbulent stock market debut last night
  • The cryptocurrency trading platform opened with shares at US$381 (around A$493) and, after a choppy day of trade, closed at US$328.28 (around A$425)
  • This gives Coinbase a fully diluted valuation of US$85.78 billion (around A$111 billion) and a market cap of US$65.39 billion (roughly A$85 billion)
  • For reference, this means Coinbase’s market cap is higher than Intercontinental Exchange Inc.’s, which owns the New York Stock Exchange
  • However, Coinbase admitted in its own financial prospectus its revenue is closely tied to the performance of cryptocurrencies like Bitcoin
  • As such, the roaring success of the company’s public debut was supported by record-high prices across the cryptocurrency industry
  • On the inverse, this means when the value of digital coins like Bitcoin and Ethereum falls, Coinbase’s revenue — and market value — is likely to follow
  • Nevertheless, the Coinbase NASDAQ debut gives traditional investors who may be wary of the crypto market a chance to indirectly take a stake in the industry

The 2021 crypto frenzy has hit a new milestone with major crypto company Coinbase’s turbulent stock market debut last night.

The cryptocurrency trading platform was valued at a whopping US$86 billion (around A$111 billion) at the end of its first day of trade on the NASDAQ. Coinbase is the first major cryptocurrency company to list its shares on a U.S. exchange.

The company’s stock opened at US$381 (around A493) per share, which is over 50 per cent above its reference price of US$250 (roughly A$327) per share set by the NASDAQ on Tuesday.

A reference price is set by a stock exchange based on its expectations of where it expects a company’s securities to open.

Coinbase went public through a direct listing rather than a conventional initial public offering (IPO) — meaning shares simply begin trading on the public market.

Despite a volatile day of trade, Coinbase consistently outperformed its reference price, climbing as high as US$429 (around A$556) per share and swinging as low as US$310 (around A$402) per share over the course of the trading session.

Shares closed at US$328.28 (around A$425) each with a fully diluted valuation of US$85.78 billion (around A$111 billion) and a market cap of US$65.39 billion (roughly A$85 billion).

This means Coinbase is already worth more than the exchanges its shares will trade on; the NASDAQ itself has a US$26 billion (roughly A$34 billion) market cap, while Intercontinental Exchange Inc., which owns the New York Stock Exchange, has a market cap of US$66 billion (roughly A$85 billion).

For reference, Goldman Sachs’ market cap is just shy of US$115 billion (around A$149 billion).

More hype or strong fundamentals?

There’s no doubt 2021 has seen retail traders take advantage of speculative buys, with many reaping multi-bag rewards.

Alongside the Reddit-fuelled Gamestop surge in January, cryptocurrencies have reached all-time highs frequently throughout the year.

Bitcoin hit a new record-high of over $84,000 just this week. Smaller rival Ethereum hit its own record high of almost $3200 per coin last night. Even smaller coins, like meme crypto Dogecoin, reached new heights this week; Dogecoin soared more than 85 per cent overnight to surpass 10 cents for the first time.

So, is Coinbase’s success based purely on the crypto hype?

Analysts suggest yes, but only to a degree. The company has built up a successful platform, but the bullish crypto market certainly helps.

While Coinbase is profitable, making between US$730 million and US$800 million (between $945 million and A$1.04 billion) in net profit over the first three months of 2021, the crypto platform admitted in its own financial prospectus its revenue is closely tied to the performance of cryptocurrencies.

The Director of research at crypto website The Block, Larry Cermak, said as much earlier this week.

“The correlation to bitcoin will be very high after the stock stabilizes after listing,” Larry told Reuters.

“When the price of bitcoin goes down, it’s inevitable that Coinbase’s revenue and inherently the price of the stock will decline as well,” he said.

Regulatory risks also pose a threat to the business as more and more users sign up to the Coinbase platform.

Nevertheless, the Coinbase NASDAQ debut gives traditional investors who may be wary of the crypto market a chance to indirectly take a stake in the industry.

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