The next chapter in the crypto craze is set to be a pivotal one.
Cryptocurrency exchange Coinbase is set to make its public market debut Wednesday at a valuation of between $50 billion and $100 billion, larger than major stock exchanges such as Nasdaq and Intercontinental Exchange, the parent company of the New York Stock Exchange.
The move could force investors and institutions alike to take a closer look at the entire digital asset space, Amplify ETFs founder and CEO Christian Magoon told CNBC's “ETF Edge” on Monday.
“There could be a revaluation for this whole segment higher when you see some of the numbers that come from Coinbase,” said Magoon, whose blockchain-focused Amplify Transformational Data Sharing ETF (BLOK) will likely add Coinbase to its holdings after the debut.
Coinbase's revenues for the first quarter of 2021 were 1.5 times its revenues for all of 2020. It is the largest cryptocurrency exchange in the United States and will be the first of its kind to enter the public arena.
“I think we're going to see more private companies go public because they see the path, hopefully, that Coinbase takes that recognizes the value in the public marketplace,” Magoon said.
Additionally, at least four exchange-traded fund issuers have filed for crypto-related ETFs in the last two months that could take advantage of what will likely be the largest pure-play public company in the industry, Magoon said.
“This will be a new asset class in the ETF space that will be built out beyond the two or three funds that exist today,” he said, adding that there's a high chance Ark Invest's fintech and innovation ETFs will also buy in.
Investors simply “can't ignore” a company that grew earnings ninefold on a year-over-year basis, Matt Hougan, chief investment officer of Bitwise Asset Management, said in the same “ETF Edge” interview.
“You just don't see this kind of growth from large-cap equities,” said Hougan, whose company runs the Bitwise 10 Crypto Index Fund (BITW). “Every investor, not just crypto investors, are going to have to reckon with that growth, think about where it's going and decide if it belongs in a portfolio, and that just makes it a game changer for where crypto exists in the total capital market spectrum.”
Hougan compared concerns around Coinbase's listing to the ones retail investors had about the 2012 IPO of Facebook, which also went public at a $100 billion valuation.
“People said the valuation was absurd. People didn't trust it because it was kids dressed in hoodies serving a new audience that they weren't familiar with. That's the same thing here. This is a giant company that's churning out real revenue and real profits,” he said. “I think those valuations may not be as absurd as people think, it's just people aren't comfortable with this corner of the economy in the same way they weren't comfortable with Facebook back in 2012.”
The valuation conversation likely won't just stop at purely crypto companies, Tim Seymour, founder and chief investment officer of Seymour Asset Management, said in the same “ETF Edge” interview.
“This is a frontier that the multiples on what people are willing to pay don't make sense. What is the imputed multiple on Square or other companies that have talked about being able to do bitcoin transactions and crypto transactions?” Seymour said. “We can name all the companies that have had significant market cap increases here.”
“So, look, it's exciting,” he said. “It's exciting to have that pure play. I think that really is the point, and where it settles in is going to be also another issue. I mean, think about the move we've had in the underlying currencies, especially outside of bitcoin and even in the broader digital token landscape, all of the focus on NFTs, and you get the perfect storm here for this valuation, which is all over the map.”
Bitcoin hit a new all-time high on Tuesday ahead of the listing. The cryptocurrency is up nearly 118% this year, according to Coin Metrics.
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