- Increasing competition in the market can outweigh Coinbase
- Coinbase valuation is put to $100 billion
Coinbase is soon to go public via direct selling. The cryptocurrency has a rumoured valuation of $100 billion, which is expected to be too high to increase competition in the market.
Coinbase IPO might face competition from other global exchanges
Coinbase Global Inc. Private trading platform is making headlines by announcing going public through direct selling in March. However, David Trainer, CEO, New Constructs, believes that investors should restrain themselves from purchasing the stock of Coinbase if the valuation is put to $100 billion approximately.
The platform’s valuation is considered very high, given the increasing market competition. The company was in profit in 2020, but the current expected valuation puts that Coinbase will become the largest exchange in the world by revenue. However, this is not assured as many other competitors are plying in the industry, and they are operating fairly well. Some of them are Gemini, Kraken, and Binance.
According to Bloomberg’s reports, Coinbase last week indicated the company’s valuation to be $90 billion, which is now gone up to $100 Billion. According to the sources, the shares were sold for $350 per share last Thursday via a Nasdaq Private Market auction. And now, as per the Bloomberg reports, the share price per share has touched $375, which has placed the company value at around $100 billion.
Last year in 2020, the net revenue of Coinbase was over 96%, as per the filings by Coinbase. The trainer suggested that the exchange’s transactional revenue acts as a percentage of trading volume, which is 57 times higher than the International Exchange, which runs the New York Stock Exchange.
The rat race of crypto trading fees
The analyst believes that the stock trading fees act as an indicator to the crypto trading fees, then the value-driven will go down early if not to zero. To take on the market share and hold in the market, competitors like Gemini, Bitstamp, Kraken, Binance and others will likely offer lower or zero trading fees. Hence, it will start the same rat race to the bottom, observed in 2019.
Hence, Coinbase has difficulty maintaining hefty fees in the developed market. Coinbase will earn a neutral rating from New Constructs on the company’s expected valuation. D.A. Davidson started targeting the price of Coinbase at $195.Nevertheless, the analyst believes that it is too early to conclude and tell if Coinbase will be the next Amazon of Crypto or the failing Netscape.