The historic rally in the price of bitcoin helped that cryptocurrency exchange Coinbase to ramp up its revenues nine folds for the first quarter of the current year compared to the same period a year ago, the company said while preparing for making a debut on the Nasdaq stock exchange next week.
Coinbase said in a press release that compared to revenue of $190.6 million in the first quarter of 2020, its revenues in the same period this year was at about $1.8 billion, but added that the number was preliminary and unaudited.
With 56 million verified users, the net income of the company grew to between $730 million and $800 million fofr the same period from $31.9 million a year ago. Coinbase said.
Benefitting from the continued growth in the tech sector despite broader economic struggles caused by the coronavirus pandemic, Coinbase is set to become the latest tech firm to make a market debut with a massive valuation. The company has been valued at $68 billion in trading on the private market which according to analysts, will increase to about $100 billion when a fully-diluted share count is factored in.
There have been public listings of a number of tech companies, including software vendor Snowflake, food delivery app DoorDash, room-sharing site Airbnb and gaming platform Roblox, in the past seven months. The combined market cap of these companies currently is between $40 billion and $113 billion.
The valuation of Coinbase is however unique because it follows the pattern of growth of the cryptocurrencies. Within the last one year, the value of bitcoin itself has risen by about 700 per cent while there has been an appreciation of 1,100 per cent in the value of ethereum.
The direct listing, which is set for April 14, was approved by the SEC last week, Coinbase said. it plans to register nearly 115 million shares of Class A common stock, which will trade under ticker symbol COIN, at the exchange, the company has said.
Coinbase is betting on the development of a larger ecosystem of crypto-related assets in the coming years even though currently its business is significantly dependent on it being able to attract users who store and trade the two major cryptocurrencies.
“We expect meaningful growth in 2021 driven by transaction and custody revenue given the increased institutional interest in the crypto asset class,” the company said in the release.
There were about 6.1 million monthly transaction users (MTUs) of Coinbase for the first quarter, the company said. For the entire of 2021, the company set out three possible scenarios that will dictate the revenue its earns because a very large proportion of the company’s revenues is generated from those transactions.
The most aggressive estimates of the company is that its MTUs could increase to 7 million because of rising market values, while it assumes that its MTUs will drop to about 5,5 million if there is a flat crypto market. At the worst, the company expects its MTUs to drop to 4 million if there is a drop in crypto prices.
(Adapted from CNBC.com)