In 2017, as bitcoin reached nearly $20,000, retail investors dominated the scene (and often lost their shirts in poorly regulated initial coin offerings). This time, the boom is more broad-based. It is banks and companies like Tesla and Square that are fueling the surge, along with high-profile names including Elon Musk and Paul Tudor Jones.
Coinbase's S-I IPO document, released today, backs up the notion, showing that institutional money accounts for an ever-higher percentage of the exchange's deal flow. In Q4 2020, institutions traded $57 billion worth of crypto compared to just $32 billion from retail investors. In Q4 2019, the split was just $9 billion to $5 billion.
Coinbase was a success story even before this institutional interest. But now it looks like a winner across the markets. It really couldn't find a better time to be going public.
Sam Bankman-Fried, CEO of the Hong Kong-based FTX exchange, joined First Mover this morning to discuss the outlook for crypto trading businesses.
The 28-year-old described Coinbase's mooted $100 billion valuation as very high based on its 2020 revenue. But he said it could be justified if the trading volumes we've seen so far in 2021 continue. Each trade means more revenue on Coinbase's balance sheet.
FTX has discussed going public internally and has no immediate plans as yet. But Coinbase and other imminent initial public offerings are driving interest.
"A lot of players in the crypto space right now are at least trying to understand what’s involved in that process [of going public]. And the Coinbase valuation is one driver of that,” he said.
Watch the full interview here.
The U.S. Securities and Exchange Commission has published Coinbase's S-1 filing, clearing the way for the crypto bellwether to go public on Nasdaq. Publication "provides the first public view of its financial performance and how it intends to use the funds it raises," says CoinDesk's Nik De. The company generated net income of $322.3 million in 2020, with CEO Brian Armstrong taking home almost $60 million.
Digital dollar preconditions
With U.S. Federal Reserve Chair Jerome Powell saying 2021 is crucial year for the development of a U.S. digital currency, the Fed issued a working paper outlining key requirements. Privacy issues, ease of use, security access and delivery mechanisms should all be on the table as Fed officials work to “sharpen” a digital dollar with the public’s help, the paper said.
NFTs marry DeFi
With non-fungible tokens getting a good deal of market buzz, decentralized finance is entering the scene. A new service called NFTfi allows borrowers to post digital collectibles (like NFT artworks) as collateral, earning yield in the process. The project is just one example of a marriage between NFTs and DeFi, says Brady Dale, CoinDesk senior reporter.
- A BitcoinPaperWallet "back door" may have lost millions for its users (CoinDesk)
- Charlie Munger says bitcoin is too volatile to be a medium of exchange (CoinDesk)
- Mt. Gox's creditors are to vote on a "rehabilitation plan" that will see assets returned in their original form (CoinDesk)
- Mohamed El-Erian, chief economic adviser at Allianz, said bitcoin investors fall into three categories: monetary believers, people rejected by mainstream finance and speculators. All three groups should concern central banks. (Decrypt)
- Crypto custodian Anchorage has raised $80 million in a new funding round (The Block).
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