Total cryptocurrency-market capitalization surpassed $1 trillion for the first time last month, suggesting that yet more companies with a stake in the sector may be preparing to test the waters.
With its recent draft registration at the US Securities and Exchange Commission, Coinbase announced its intention to become the first cryptocurrency-native corporation to list on a major US stock exchange. The cryptocurrency exchange, which claims over 43 million verified users, was valued at more than $66.9 billion in late January on an FTX-operated futures market, prior to its upcoming initial public offering (IPO).
Coinbase’s listing would be “a massive event,” not only in the US but also in Europe, showing how markets can value cryptocurrency firms, says Vladimir Vishnevskiy, director and co-founder of Swiss-based St. Gotthard Fund Management.
Other cryptocentric firms are looking to take advantage of a red-hot IPO market. In January, Bakkt, a cryptocurrency derivatives trading platform owned by Intercontinental Exchange (ICE), announced that it was set to merge with VPC Impact Acquisition Holdings, a special purpose acquisition company (SPAC). ICE also owns the New York Stock Exchange, where the SPAC would be listed. Bakkt was founded by Kelly Loeffler, who recently lost reelection as a US senator in Georgia and whose husband Jeffrey Sprecher is CEO of ICE and NYSE chairman.
IPO speculation last fall also touched Digital Currency Group (DCG), a conglomerate that owns cryptocurrency trading firm Genesis, cryptoasset manager Grayscale and media concern CoinDesk. DCG could be valued as high as $4 billion if it went public, Messari, a research firm focused on the cryptocurrency economy said in a research note.
Previous IPO efforts in the sector have largely failed, some “for disreputable reasons, others because of a difficult US regulatory environment,” says Edward Moya, analyst at Oanda, a currency services firm. Coinbase, which has selected Goldman Sachs to lead its offering, is itself reported to have internal issues of gender and racial discrimination. But it is unlike some others in the sector in that it has actively embraced regulation, including know your customer (KYC) protocols.
Normally, a frothy cryptocurrency market combined with a highly charged IPO sector—or “frothy-squared,” as Aaron Brown, a crypto investor and Bloomberg opinion writer, recently put it—would raise red flags; but these are unusual times, what with liquidity-laden investors desperate for hot new fintech issues. Total cryptocurrency-market capitalization surpassed $1 trillion for the first time last month, suggesting that yet more companies with a stake in the sector may be preparing to test the waters.