Coinbase Ipo: A Guide To Investing In The Crypto Exchange

Coinbase is a major US-based cryptocurrency exchange that went public in 2021, marking a milestone in the world of cryptocurrencies as the first pure-play crypto trading company to list on a US exchange. Coinbase's IPO was highly anticipated as the company is the largest crypto platform in the US and the second-largest in the world. The company's revenue soared 847% in the first quarter of 2021 to $1.8 billion, and it reported 56 million verified users. Coinbase's IPO was unique in that it was a direct listing rather than a traditional initial public offering, meaning the company wasn't raising new money. This article will explore how to invest in the Coinbase IPO.

Coinbase's IPO trading basics

Coinbase IPO Trading Basics

Coinbase is a US cryptocurrency exchange that went public on April 14, 2021, through a direct listing on the NASDAQ stock exchange under the ticker symbol "COIN". A direct listing differs from a traditional IPO in that the company's employees and existing investors convert their ownership stakes into shares that are then listed directly on a stock exchange, negating the need for an underwriter. This results in increased volatility compared to a traditional IPO.

Buying Coinbase Shares

• Create an account or log in to a trading platform.
• Search for 'Coinbase'.
• Select 'buy' in the deal ticket.
• Choose your position size and manage your risk. Coinbase shares may take a few hours to become available, and you cannot go short initially.
• Open and monitor your long position.

Selling Coinbase Shares

• Create an account or log in to a trading platform.
• Search for 'Coinbase'.
• Select 'sell' in the deal ticket.
• Choose your position size and manage your risk.
• Open and monitor your short position.

Coinbase shares are traded with CFDs (leveraged derivatives), so it's important to manage your risk effectively.

Coinbase's Business Model

Coinbase's business model revolves around two core products: a global digital asset exchange (GDAX) for trading cryptocurrencies and a user-facing platform for trading bitcoin, bitcoin cash, ether, litecoin, and others. The company offers two types of accounts: regular and pro, with varying commission fees.

Analyzing Coinbase Share Price

To analyze Coinbase's share price, you should use both technical analysis (chart patterns, technical indicators, historical price action) and fundamental analysis (net revenue, profit and loss statements). Coinbase's share price is expected to be volatile due to the inherent instability of the cryptocurrency market.

How to buy Coinbase shares

Coinbase is a US-based cryptocurrency exchange that went public on 14 April 2021. Coinbase shares are listed on the NASDAQ stock exchange under the ticker symbol "COIN".

• Research the future of cryptocurrency: Understand the market and the product. Ask yourself if you believe there is a future for cryptocurrencies and if Coinbase is positioned to capitalise on the popularity of cryptocurrency.
• Open a brokerage account: You will need a brokerage account to buy stocks like Coinbase. You can open an account in just a few minutes and fund it before placing your Coinbase order.
• Decide how much to invest: Only invest an amount you can afford to lose and make sure it is not money you might need in the near future.
• Search for Coinbase stock: Log in to your brokerage account and search for "COIN" to find Coinbase stock.
• Place your order: Decide how much you want to buy in dollars or shares and place your order.

It is important to note that Coinbase shares can only be traded indirectly through CFDs, which are complex instruments and come with a high risk of losing money rapidly due to leverage. Make sure you understand how this product works and whether you can afford to take the high risk of losing money.

Coinbase's business model

Coinbase offers accounts to potential clients for cryptocurrency trading. In total, the company offers over 25 cryptocurrencies to its users, some of which are niche opportunities referred to as ‘altcoins’. These are not widely known in the cryptocurrency mainstream and don’t have the name recognition of bitcoin, ether or litecoin.

The company charges a commission fee for its users to use its platform and its users can trade with leverage. It has two accounts: regular and pro. The regular account charges higher commissions, while the company’s pro account has lower commission fees for users.

Coinbase makes money in many ways today, including trading fees, maker and taker fees, interchange fees, interest on cash, sales of software tools, and interest on personal loans.

The bulk of the revenue Coinbase generates still comes from the fees it charges for buying and selling cryptocurrencies.

Coinbase applies a tiered commission structure, meaning the amount of fees charged varies by location and total transaction volume.

Coinbase also makes money through its credit card. The card is free to acquire and use. Coinbase makes money whenever a customer uses that card, more precisely through the payment fee that is charged.

Coinbase also offers a custody service. To be able to join the custody service, the user has to deposit a minimum of $1 million. Coinbase makes money by charging an implementation fee of up to $10,000.

Furthermore, the company charges a custody fee of 50 basis points (annualized).

Coinbase also offers a variety of courses about new cryptocurrencies. Upon completion of a course, users will receive these currencies as a reward.

Coinbase's security protocols

Coinbase has implemented several security protocols to protect its users' accounts and assets. Here are some of the key features and recommendations to ensure the security of your Coinbase account:

• Password Security: Coinbase prioritises password security to prevent unauthorised access. Users are advised to create strong passwords, enable two-step verification, and regularly change their passwords to enhance security.
• Device Confirmation: Coinbase may send device confirmation emails to ensure that any new device attempting to access your account is recognised and authorised by you.
• Phishing and Scam Protection: The platform provides guidance on identifying and reporting phishing attempts or technical support and impersonation scams. Users are encouraged to be vigilant and report any suspicious activity.
• Account Security: Coinbase offers features such as locking your account when not in use and revoking access from unauthorised devices. Users can also enable two-factor authentication for added security.
• Transaction Security: Coinbase allows users to report unauthorised transactions. It is important to review transaction history regularly and report any suspicious activity promptly.
• Recovery Phrase Security: For self-custody wallets, Coinbase emphasises the importance of keeping your recovery phrase safe and private. It should be stored securely, as it serves as the master password to your wallet.
• Network Security: Coinbase recommends against using public Wi-Fi networks for transactions due to the risk of cybercriminal activity. Users are advised to utilise secure network connections to protect their accounts and transactions.
• Data Privacy: Coinbase provides information on how they use and protect your personal information, including ID verification and bank account details.

Coinbase's IPO valuation

The IPO valued Coinbase at over $65 billion, with a projected valuation of $100 billion or more. This projected valuation faced criticism from some analysts, who argued that it was excessively high and not supported by the company's fundamentals. David Trainer of New Constructs stated that for Coinbase to justify a $100 billion valuation, it would need to become the biggest financial exchange in the world.

Coinbase's IPO performance reflected the excitement surrounding the company's public debut. The stock opened at $381, reaching a high of $429.54, before closing at $328 on the first day. This closing price gave Coinbase an approximate valuation of $85 billion to $86 billion after the IPO.

The IPO highlighted the growing mainstream adoption of cryptocurrencies and the unique opportunity for investors to gain exposure to the cryptocurrency market without directly investing in crypto assets. However, critics cautioned that the company's revenue and profit margins were heavily reliant on the trading of Bitcoin and Ethereum, making Coinbase susceptible to fluctuations in the cryptocurrency market.

In summary, Coinbase's IPO valuation was significant, reflecting the company's position as a leading cryptocurrency exchange. The public debut attracted strong interest from investors, resulting in a substantial valuation for the company. However, critics questioned whether the valuation was sustainable, given the competitive landscape and the potential for fee compression in the cryptocurrency trading industry.

Frequently asked questions