- Coinbase, one of the largest cryptocurrency businesses in the world, is preparing for an initial public offering (IPO)
- The company was valued at $8 billion in 2018, but its valuation is likely much higher now
- The FTX cryptocurrency exchange has created a market where traders can speculate what the market cap of Coinbase will be once it goes public
Buy Coinbase Futures on FTX
You can buy the CBSE pre-IPO contracts on FTX.
The crypto world is anticipating the Coinbase IPO
Coinbase is one of the largest cryptocurrency businesses in the world and serves millions of customers with both the consumer-facing Coinbase platform and the fully-feature Coinbase Pro cryptocurrency exchange. Coinbase is involved in almost all areas of the emerging cryptocurrency and blockchain industry – the company also serves institutional players through its Coinbase Prime prime brokerage platform, and offers cryptocurrency custody services through Coinbase Custody.
Even though Coinbase is somewhat notorious in the cryptocurrency community for having technical issues when demand is high amidst highly volatile price action, the company nevertheless enjoys a solid reputation overall, and has never lost customer funds in a security breach. This is quite a feat given that Coinbase has been operating since 2012 and cryptocurrency exchanges are extremely attractive targets for hackers.
Coinbase has long been rumored as one of the first major cryptocurrency companies that’s likely to go public, i.e. have its shares traded on a stock exchange like the NYSE or NASDAQ. In December, Coinbase publicly announced that it confidentially filed a Form S-1 with the Securities and Exchange Commission (SEC), essentially confirming that it’s planning to go public.
Significant players like Airbnb, Palantir, Snowflake and Unity have held IPOs recently, and Coinbase could be joining the list of hotly-anticipated IPOs in 2021.
Coinbase was valued at $8 billion in an October 2018 Series E round in which it raised $300 million from the likes of Tiger Global Management, Y Combinator Continuity and Wellington Management.
Given the immense growth of the cryptocurrency market since then, it’s likely that Coinbase’s IPO valuation will be significantly higher. While cryptocurrency was in a harsh bear market throughout 2018, the total market cap of the aset class is now larger than $1 trillion, with Bitcoin alone having a market cap of almost $800 billion.
How to buy Coinbase stock
It’s unclear how long it will take until Coinbase actually goes through with its IPO. However, the cryptocurrency industry never sleeps and the FTX cryptocurrency exchange has already launched a market that allows traders to speculate on what the valuation of Coinbase will be when the company IPOs.
The FTX crypto exchange has launched CBSE, a contract that’s traded against USD-pegged stablecoins. The price of 1 CBSE contract tracks the market’s expectations for what Coinbase’s market cap divided by 250 million will be after the close of the first trading day when Coinbase’s shares are traded publicly. In other words, if you want to know what traders on FTX believe the market cap of Coinbase will be, multiply the current price of CBSE with 250 million. Currently, the contract is trading at $322, implying a market cap of $80.5 billion.
Create FTX Account
After the first trading day, FTX will convert users’ CBSE holdings to tokenized stocks representing shares in Coinbase. So, CBSE is a way for users to speculate on the valuation of Coinbase even before the company actually goes through its IPO.
It’s also important to note that in order to trade CBSE or tokenized stocks on FTX, you need to verify your identity through a KYC (know your customer) process. The product is also not available to users from all countries, so make sure to check FTX’s terms of service beforehand.
Of course, there are numerous risks associated with an instrument like CBSE. One of the risks is simply that Coinbase does not go public, whether due to regulatory reasons or some other unforeseen circumstances. The CBSE product listed by FTX has a provision for this case:
»In the event that Coinbase does not publicly list by June 1, 2022, CBSE balances will cash-expire to 32$, in line with an 8 billion dollar valuation.«
FTX is one of the few trading platforms where you can use cryptocurrency to speculate on traditional financial instruments like stocks. The exchange also offers a huge variety of cryptocurrency spot markets and derivatives, and unique products like prediction and volatility markets.
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