The Node: Coinbase Is the Listing to End All Listings

Coinbase going public today is the last stock listing that will ever matter.

That may not be true, but isn’t it kind of odd that that sentence doesn’t sound entirely off base?

Coinbase, the Silicon Valley-based cryptocurrency exchange, today plans to directly list 114,850,769 existing shares on Nasdaq. Its valuations range from $65 billion and $100 billion and beyond. That would make it more valuable than traditional exchanges like New York Stock Exchange parent Intercontinental Exchange and the exchange Coinbase’s stock (COIN) will trade on.

The listing is a watershed moment for the cryptocurrency industry. Once shunned by financial giants, crypto is now marching inexorably to mass adoption bringing institutions along with it.

Coinbase’s pitch to potential investors is largely that of crypto itself: That decentralized, open financial technologies will disrupt the way we do business. Founded in 2012, Coinbase’s mission has been to make crypto trading as easy as sending email.

By most accounts, it has succeeded. The second-largest exchange by trading volume, according to CoinMarketCap, Coinbase boasts 56 million users globally and $223 billion assets on its platform. It’s garnered over $3.4 billion in total revenue since its inception. What started out as merely an onramp has grown into what some call a crypto-native bank.

The road here has been bumpy. Coinbase reports that 95% of its revenue comes from trading fees. In times of market exuberance, the exchange is remarkably profitable. With BTC and ETH rising to all-time highs, Coinbase reported revenues of $1.8 billion in Q1, more than double what it saw throughout 2020.

There have also been lean times; the exchange ran a $45 million deficit in 2019. Other years, it made existential decisions. The unpredictability of the crypto markets is one of the many risks Coinbase cited in its going-public prospectus – along with the reemergence of Bitcoin creator Satoshi Nakamoto.

Apart from an industry downturn, skeptics think Coinbase might find itself in a race-towards-the-bottom scenario related to its core business. Right now, Coinbase charges a significant premium for trading on its platform – attributed to its status as a regulated, and historically-secure exchange.

As Fortune noted, even though volumes on Nasdaq and ICE far exceed those on Coinbase, the crypto exchange’s margins are about 50 times higher. But as other exchanges enter the fray or look to compete – be they centralized competitors like Binance or decentralized protocols like Uniswap – Coinbase could be forced to reduce fees.

Stock research firm New Constructs compared the situation to what happened to brokerage fees when Robinhood entered the picture. “The firm’s competitive position will inevitably deteriorate,” the researchers wrote.

Still, Coinbase’s central position to an industry that is reshaping the world means it’s not going anyway. Institutions that are unable or unwilling to buy cryptocurrencies directly may view the exchange’s stock as a way to gain exposure to the sector.

Crypto itself is just beginning. Coinbase is just the first major crypto firm to go public in the U.S. There will be many more. Wallets, custodians, payments firms are building a new digital-first financial system that are out-disrupting the disruptors.

Fintechs are still media darlings, but their attachment to the legacy system that crypto is eating may be their demise. Yesterday, the Wall Street Journal reported Stripe had a banner pandemic year. It’s now reportedly valued at $95 billion. But will its public offering generate as much buzz as Coinbase's?