After Falling Short of its $100bn Projections, Coinbase’s Valuation is not Certain Yet
Cryptocurrency trading company, Coinbase, is listing on the stock exchange today for $250 per share under the ticker ‘COIN’. With a share count of 261.3 million, this gives it a valuation of $65.3 billion.
This valuation is less than the $100 billion valuation that it got from NASDAQ. At its current valuation, however, the crypto-based startup shows growth from recent years due to uptake in its subscriber base and generated revenue.
Its Q1 earnings report recorded a 30% increase in verified subscriber base, bringing the number to 56 million across all 30 countries that it currently supports. Its active users grew from 2.8 million in the fourth quarter of 2020 to 6.1 million in the first quarter of 2021.
An increasing subscriber base led to an increase in transaction volume which accounts for Coinbase’ revenue jump from its Q4 2020 numbers to those for Q1 2021. It raked in $585.1 million in 2020’s last quarter and saw this figure grow to $1.8 billion in Q1 of this year.
Its Q1 2021 revenue of $1.8 billion is more than its entire 2020 revenue which was $1.2 billion.
However, 86% of its 2020 earnings were from transaction fees, according to the Motley Fool. Bitcoin price also jumped from $7,184 to $28,972 in 2020. The increase in price and trading volume led to an overall increase in transaction fees and revenue generated from it.
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Its Q1 2021 report show that trading volume rose to $335 billion. This is a rise from the $89 billion in volume posted for Q4 2020. Bitcoin price has been in a frenzy in Q1 generating higher transaction fees for Coinbase. This indicates that Coinbase’s revenue model is heavily dependent on user’s transactions and Bitcoin price.
Its continued growth in revenue would require users to carry out more transactions while it brings in more countries than it currently operates in. It will also depend on the continued rise in the price of bitcoin. A crash in the price of cryptocurrencies, especially Bitcoin, will result in lower trading volume and lower revenue for the unicorn.
In Nigeria, anyone can download the Coinbase app, create an account with it to send and receive crypto. However, they can not buy, sell or convert from one altcoin to another. The transacting users also form a part of the startup’s monetizable subscriber base because its app charges fees for sending and receiving crypto if both parties are not verified Coinbase users.
Increased adoption of altcoins for daily transactions by countries and regulators will be a major driver in Coinbase’s increased growth in the area of active users.
Big tech is creating more use cases for digital currencies as heavyweights like Tesla’s Elon Musk and Twitter’s Jack Dorsey continue to openly support Bitcoin and cryptocurrencies at large.
As a result, more people are transacting with the currencies and creating innovations around them. Being a major player in the US crypto industry, Coinbase has been a beneficiary of this increased use.
Between 2018 and 2021, the company has witnessed a 716% jump in its valuation from $8 billion to $65.3 billion. Since this is largely dependent on transaction fees and user volume, the stance of major regulators in different countries will play a major role in pushing Coinbase growth more significantly.
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