Update: Coinbase has announced that it plans to go public via direct listing on April 14. The company plans to release Q1 earnings on April 6, eight days ahead of the public debut.
It’s been a good year for crypto — and Coinbase — and it’s only February.
Coinbase, the largest cryptocurrency exchange in the US, is currently valued at $77 billion, according to the Nasdaq Private Market, where shares in the company have been privately traded at $303 a piece. That valuation makes Coinbase worth more than ICE, the $63 billion market cap company that owns the New York Stock Exchange.
Coinbase’s latest valuation may come as no surprise with the price of Bitcoin skyrocketing to a record $50,000 on Wednesday, a 66% increase from the start of 2021. The company, which plans to go public in a matter of weeks, filed a confidential S-1 for a direct listing in December. While exact share prices are still only a topic for speculation, around 254 million shares will be available to trade.
It’s always been Armstrong’s vision to make Coinbase bigger than a regular financial services provider. While the company’s journey to $77 billion has been impressive, it’s also been rocky. Here's how it became the number one cryptoasset exchange.
A brief history of Coinbase
Coinbase was founded by former Airbnb engineer Brian Armstrong and former Goldman Sachs trader Fred Ehrsam in 2012, back when Bitcoin was valued around $15. The founders went through Y Combinator’s summer 2012 program, and soon raised a $5 million Series A led by Union Square Ventures. Coinbase was quickly seen as one of the more legitimate platforms to buy and sell crypto, and was even called “one of the places that looked less sketchy” by a TechCrunch editor back in 2013.
As the company grew, so did its influence. By 2015, Coinbase had reached one million users, and had secured $100 million in investments from Andreessen Horowitz, Union Square, and the NYSE, among others. Bitcoin was going mainstream, and brands like Dell, Overstock, and Expedia were partnering with Coinbase to let customers buy their products with crypto. Fast forward to 2021, and Tesla plans to do the same with its electric vehicles. In fact, Tesla’s recent $1.5 billion Bitcoin purchase was executed by Coinbase.
How does Coinbase work?
Coinbase makes money through fees from its brokerage and exchange, and business has been booming — in 2017, revenue surpassed $1 billion, and in 2019, that number doubled. The company has four main branches: Coinbase, Pro, Custody, and Wallet.
While Coinbase is the company’s brokerage, Coinbase Pro is designed for professional traders to buy and sell crypto. It includes more features like a mobile app, lower fees, multi-country support, and insurance. In 2018, Coinbase launched Custody, a third party crypto storage provider for its larger clients. According to Coinbase, Custody has more assets under management than any other crypto custodian. Then there’s Coinbase Wallet, a crypto wallet and browser which allows users to manage and trade crypto assets, as well as pay other users.
Coinbase controversy and company future
Although Coinbase has been a darling for regulators and has avoided hackers better than most crypto startups, the company has had its fair share of controversy. Armstrong, who serves as CEO, landed in hot water after he wrote a company memo saying that the company wouldn’t get involved in politics, a break from the Silicon Valley norm. “We are an intense culture and we are an apolitical culture,” he wrote.
Armstrong followed up by offering severance packages for any employees who wished to leave the company if they didn’t agree with its mission. 60 employees took the offer.
The memo came in September, months after a similar incident during a company-wide meeting in June, at the height of the black lives matter protests. Armstrong refused to say “black lives matter” on the call, which prompted a virtual walkout by some employees.
As Coinbase prepares to go public, the company has $90 billion in assets and 43 million registered users as of January. By comparison, Robinhood has 13 million users, even after its user spike following the GameStop stonk craze. Although the company hasn’t announced a date to go public yet, it could be in for a successful run — assuming the price of Bitcoin doesn’t dip too low in the meantime.
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