Coinbase brings cryptocurrencies to Wall Street

The listing of cryptocurrency exchange Coinbase on Nasdaq on Wednesday is one of the most awaited events of the year on Wall Street, where excitement for record-breaking bitcoin is rife, despite concerns about the market's long-term viability.

Coinbase – which will be classified under the symbol COIN – is already a heavyweight as the first corporation dedicated exclusively to cryptocurrencies to join the US stock exchange.

On Tuesday night, the Nasdaq set a $250 per share reference price for the stock. Coinbase's overall value will begin at $65.3 billion, taking into account the shares in circulation, stock options, and restricted shares.

Coinbase is the most significant new entrant to the US stock exchange after Uber in 2019.

Coinbase chose a direct listing, which means it won't be able to raise new funds but would enable existing shareholders – including founders, staff, and historical investors – to sell their shares on the open market

Founded in 2012 in San Francisco by Brian Armstrong and Fred Ehrsam, the platform allows users to buy and sell about 50 cryptocurrencies, including bitcoin and ether. 

Coinbase claims 56 million total users and a little more than 6 million people making transactions each month, according to estimates from its first-quarter results, released in early April. 

The company has benefited from bitcoin's meteoric rise over the past year, with the crypto asset's price rising from $6,500 last April to a record-high above $63,000 on Tuesday. 

As a result of this craze, Coinbase's revenue has increased almost tenfold in the course of a year to $1.8 billion in the first quarter, according to group estimates. 

Its profit increased 25-fold, in the range of $730 to $800 million. 

Government concern  

Even if the situation appears to be favorable to Coinbase, analysts remain cautious, given the company's reliance on the price of volatile virtual currencies.

Before its recent meteoric rise, bitcoin had suffered setbacks, most notably in 2018, when it continued to fall.

Also Read: Bitcoin: The world’s biggest and best-known cryptocurrency hit $61,222.22

Coinbase was recently charged by the U.S. Commodity Futures Trading Commission (CFTC) of "reporting false, misleading or inaccurate" information about cryptocurrencies and manipulating the market between 2015 and 2018.

Without admitting wrongdoing, Coinbase paid a $6.5 million fine, and the company was forced to push back its listing date on Wall Street. 

Another factor that could put Coinbase at a disadvantage is its commissions, which the company uses to earn money. 

These fees are higher than those charged by some of Coinbase's competitors, especially Binance, which was established in China and appears to frighten regulators even more than Coinbase.

The CFTC recently opened an investigation into whether Binance, which is not registered with the regulator, has broken US commodities law, according to Bloomberg.