April 14, 2021 will be remembered as the day the first cryptocurrency company went public on the New York Stock Exchange, a momentous day for all the long time crypto hodlers out there! Leeor Shimron, an analyst at FundStrat Global Advisors, stated that this “is a watershed moment for the crypto industry.”, and with an 85 billion dollar valuation on their opening day (The Wall Street Journal), Shimron seems to hold a popular opinion. Additionally, an SEC filing has revealed that Coinbase made 1.8 billion dollars in revenue in their first quarter of 2021. Coinbase also deserves credit for being one of the earliest places you could buy Bitcoin, having been founded in 2012 when the price of Bitcoin was less than $15 dollars.
However, there is a case to be made that the company is overvalued, not unlike many crypto projects in space.
Firstly, Competition:
With Kraken, Binance, Gemini, PayPal and many others, Coinbase is not alone. The chances of these companies lowering their transactions fees in order to drive clientele away from Coinbase is considerably high. It is important to note that transaction fees do matter to many customers as many exchanges offer virtually the same service.
Secondly, Market Spending:
Coinbase is aware of the competition in their space and has reacted with a 3X increase in marketing spending compared to 2020, resulting in an expense of 12% to 15% of net sales. (Forbes).
Thirdly, and not convincingly, there is the ‘crypto isn't going mainstream’ argument: Although Bitcoin has proven time and time again that it is the most solid store of value/currency out there, there are still those, as we like to call them here at The Credible Crypto “Dinosaurs” who believe that it is but a fad and has no place in our financial system. To those I say: have fun staying poor!
Nonetheless, on a more serious note, I can't speak definitively to the valuation of Coinbase, however, I can say that I have high confidence in the long term prospects of Coinbase as they offer infrastructure in an industry that is bound to change our financial sector and commerce as a whole!
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