Coinbase Ipo: How To Invest And Make Profits

Coinbase is a major US-based cryptocurrency exchange that went public in 2021. The company's shares began trading on the Nasdaq exchange under the ticker symbol COIN, marking a milestone in the world of cryptocurrencies as Coinbase was 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 opted for a direct public offering (DPO) instead of a traditional IPO, which allowed early investors and company insiders to cash in on their investments without being restricted by a lockup period. Coinbase's business model is based on its two core products: a global digital asset exchange (GDAX) and a user-facing platform for trading cryptocurrencies. The company charges a commission fee for users to trade on its platform and offers two types of accounts: regular and pro.

Coinbase's IPO is a risky buy

Coinbase is a leading cryptocurrency exchange platform that made its stock market debut in April 2021, trading under the ticker COIN. While Coinbase's prospects are good, there are several reasons why its IPO is a risky buy for conservative investors.

Firstly, Coinbase's revenue is heavily dependent on cryptocurrency trading volume. In 2020, the company generated 86% of its revenue from transaction fees, mainly from cryptocurrency trading. While a boom in cryptocurrency prices can boost Coinbase's trading volumes, a crash in the market can significantly impact its revenue. For example, in 2018, when cryptocurrencies crashed, Coinbase's trading volume slid by more than 80%, and the number of users making transactions fell by 67%. This overreliance on trading to drive profits makes Coinbase a risky bet, as its revenue is directly linked to the volatile cryptocurrency market.

Secondly, Coinbase's valuation at the time of its IPO was considered excessive by some analysts. With a potential valuation of around $100 billion, it would be valued higher than established stock exchanges like Nasdaq Inc. and Intercontinental Exchange. Such a high valuation sets high expectations, and if the company fails to meet these rosy expectations, its valuation could easily collapse.

Additionally, Coinbase's direct listing approach, without the involvement of banks as underwriters, means that its share price is completely at the mercy of market demand, which can lead to increased volatility.

Furthermore, as Coinbase is a centralized company operating in the decentralized world of cryptocurrencies, there is a potential conflict with the very essence of the industry it serves.

Lastly, as with any investment in a company that has recently gone public, it is essential to carefully research and understand the risks involved. Coinbase's success is tied to the popularity and trading volume of cryptocurrencies, which are highly susceptible to changes in demand. Therefore, a decline in the demand for or the price of cryptocurrencies could negatively impact Coinbase's revenue and, consequently, its share price.

In conclusion, while Coinbase has strong potential in the growing cryptocurrency market, its IPO carries significant risks that potential investors should carefully consider before investing.

How to buy Coinbase stock

Coinbase is a major US-based cryptocurrency exchange that went public in 2021. Coinbase stock gives investors exposure to the cryptocurrency market without directly investing in cryptocurrency. Coinbase shares can be bought and sold on the Nasdaq exchange under the ticker symbol COIN.

• Research the future of cryptocurrency: Your investment's potential success is tied to the popularity and trading volume of cryptocurrencies. Do you believe there is a future for cryptocurrencies like Bitcoin and Ethereum? Do you believe that cryptocurrency is the "future of money" as Coinbase states on its website?
• Understand Coinbase's role in the future of crypto: If you believe in the future of cryptocurrencies, the next step is to ask yourself if Coinbase is positioned to capitalize on cryptocurrency's popularity. This is where investors might perform an analysis of the company's revenue, earnings, user growth, competition, and management.
• Decide how much to invest in Coinbase: When investing in Coinbase, only invest an amount you can afford to lose. Don't invest any cash that you might need in the near future. It is generally recommended to fund a long-term, index fund-based investment plan before investing in a company that has recently gone public.
• Open a brokerage account: To buy stocks like Coinbase, you need a brokerage account. Brokerage accounts also offer access to other investments like mutual funds, bonds, and exchange-traded funds. It only takes a few minutes to open an account, and once funded, you can place your Coinbase order on the broker's website or trading platform.
• Search for Coinbase stock: Search for Coinbase stock within your brokerage account platform by searching for the symbol "COIN".
• Decide how much you want to buy: Decide how much you want to buy in dollars or shares.

It is important to note that Coinbase's revenue is linked to cryptocurrency trading volume. In 2018, when cryptocurrencies crashed, Coinbase's trading volume slid by over 80%, and the number of users making transactions every month fell by 67%. Therefore, investing in Coinbase carries risks and investors should carefully consider their investment goals and risk tolerance before investing.

Coinbase's business model

Coinbase's platform serves as a search and discovery engine for crypto assets, enabling customers to trade cryptocurrencies. The company's mission is "to create an open financial system for the world", empowering individuals and businesses with economic freedom.

Coinbase offers two core products: a global digital asset exchange (GDAX) and a user-facing platform for trading bitcoin, bitcoin cash, ether, litecoin, and other cryptocurrencies. The company charges a commission fee for its users to use its platform, and it offers two types of accounts: regular and pro. The regular account charges higher commissions, while the pro account has lower commission fees.

In addition to its trading platform, Coinbase offers a range of other products and services. These include:

• USD Coin (USDC): The company's own cryptocurrency, pegged to the US dollar.
• Coinbase Wallet: A standalone app that allows users to store and transfer cryptocurrencies.
• Coinbase Card: A VISA debit card that allows users to spend their cryptocurrencies in the physical world.
• Coinbase Commerce: Tools for businesses to accept digital currency payments.
• Coinbase Earn: Educational courses about new cryptocurrencies, with payouts in the currency of the course upon completion.
• Coinbase Analytics: A tool for law enforcement and financial institutions to monitor blockchain transactions.
• Coinbase Ventures: A dedicated investment team that finances early-stage companies in the blockchain and cryptocurrency space.

Coinbase's revenue model primarily consists of transaction revenues, subscription and service revenues, and other revenues such as crypto-asset sales revenue and corporate interest income. The company's profitability is closely tied to trading volumes and interest in crypto assets, with subscription services and institutional participation helping to stabilise revenues.

Coinbase's direct listing

Coinbase is a US-based 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 is when a company floats its shares on a stock exchange without hiring banks to underwrite the transaction, as is usually done in an IPO. In a direct listing, a company's employees and existing investors convert their ownership stakes into shares that are then listed directly on a stock exchange for purchase by institutional and retail investors. This negates the need for an underwriter, and there is no target price range for the company's shares. As a result, direct listings tend to be more volatile than traditional IPOs.

• Open a brokerage account.
• Search for Coinbase stock within your brokerage account platform.
• Decide how much you want to buy, in dollars or shares.
• Select 'buy' in the deal ticket.
• Choose your position size and take steps to manage your risk.
• Open and monitor your long position.

Coinbase's fee structure

Coinbase Transaction Fees

Also known as the Coinbase Fee, this is a confusing fee structure that considers multiple factors. The user will pay either a flat fee or a variable percentage of the transaction, depending on region, product, and payment method. Coinbase does not publish these fees, but they are usually 1% or higher.

Coinbase Spread Fees

Coinbase includes the fees for spread in the price whenever you purchase or sell your crypto. It will also be included in the exchange rate if you convert your crypto. The spread allows Coinbase to temporarily lock in a price for trade execution while you review the transaction details before submitting your transaction. This spread applies to all cryptocurrency transactions on the Coinbase platform and while using the Coinbase Card.

There is no spread charged when using Coinbase Advanced because you are placing orders directly on the order book.

Coinbase Subscription Fees

Coinbase One is a subscription product that offers fee-free buying and selling of cryptocurrencies, with certain limitations. Members may still have spread included in their quoted prices.

Coinbase Staking Fees

When you stake your crypto on the Coinbase platform, Coinbase charges a commission on rewards that you earn. Here’s a breakdown:

• 35% for ADA, ATOM, DOT, MATIC, SOL and XTZ
• 26.3% for ADA, ATOM, DOT, SOL and XTZ if you’re an eligible Coinbase One member

Coinbase Network Fees

When you transfer cryptocurrency off the Coinbase platform, you will be charged a network fee. These fees vary based on the type of cryptocurrency being transferred, and the prevailing network fees for a stand-alone wallet-to-wallet send.

Coinbase Lightning Network Processing Fee

The Lightning Network is a micropayment network that enables the transfer of bitcoin without incurring the transaction fee associated with the Bitcoin blockchain. When you send bitcoin from Coinbase via the Lightning Network, a processing fee equal to 0.1% of the amount of bitcoin transferred is charged.

Coinbase Cash Fees

When you add cash or withdraw funds from your Coinbase account, there may be a fee assessed, depending on the funding method used. Here are the fees for funding or withdrawing fiat currency from your account:

If you borrow USD from Coinbase or another affiliate of Coinbase using BTC as collateral and the BTC collateral is sold (as per the loan agreement), you are charged a flat fee of 2%.

Coinbase Card Fees

While the Coinbase card doesn’t have transaction fees, you will pay a spread fee when spending your cryptocurrency balance using the card. If you use your Coinbase card at an ATM, you may be charged operational fees.

Coinbase Advanced Fees

Coinbase Advanced is the advanced trading platform of Coinbase that is suitable for more experienced traders. Coinbase Advanced fees are based on a maker/taker model. The fees have a maximum of 0.40% maker and a maximum of 0.60% taker, based on your 30-day trailing volume. Here’s a quick explanation of maker and taker orders:

• Maker orders: “Makers” create orders for other traders to take. They add liquidity to the order book. These orders are not filled immediately.
• Taker orders: “Takers” take orders created by makers. They remove liquidity from the order book. These orders are made at market price and filled immediately.

Frequently asked questions