What Coinbase’s Public Debut Means for Bitcoin and Crypto | WSJ

– [Narrator] Cryptocurrencies
and Wall Street have mostly been operating in two separate worlds, until now. – We are listing a stock on the Nasdaq. – [Narrator] Coinbase,
the US's most popular cryptocurrency exchange, is going public and that's a big deal for both Wall Street and the crypto community. – Not only does it make crypto and Bitcoin a little more acceptable, it actually now gives
investors another way to invest in Bitcoin. – [Narrator] The company allows users to trade and store cryptocurrencies and charges fees on all transactions. It profits when cryptos
like Bitcoin trade higher and in the first quarter of 2021, when Bitcoin's price doubled, Coinbase's revenue was $1.8 billion. Coinbase's revenue being
tied to Bitcoin's value has led investors to wonder
if the platform's share price will be just as volatile as Bitcoin, which is known for its big price swings.

Coinbase has said it wants to do much more than selling Bitcoin. – We're gonna basically
try to make it easy for our customers to access
all the different things they might wanna do with crypto. – [Narrator] The crypto industry has so far mostly grown
outside of the traditional and regulated investment system and has an image of being a risky asset, also due to hacks and cyber crime. This listing is meant
to help legitimize it.

So will Coinbase's public debut be a turning point for crypto? Nasdaq set the reference
price for Coinbase at $250, which would give
the company a valuation of about $65 billion. That's about eight times its valuation in a 2018 fundraising round. To understand why the listing is making waves on Wall Street, you have to understand what
attracted some 56 million users to the platform. When Bitcoin first emerged around 2010, it wasn't exactly easy to trade. WSJ crypto reporter, Paul Vigna, has been following Bitcoin and
Coinbase for quite some time. – I've been writing
about Bitcoin since 2013. In the early days, you had to basically download
the Bitcoin software, the actual program itself, run it on your computer,
maintain a wallet, maintain a node on the network and for a lot of people, it was just technologically too big a deal for them to bother with. – [Narrator] Coinbase was created in 2012 and was one of several platforms that offered an easier
way for people to buy, sell and store cryptocurrencies.

– The whole point of it
was to be very simple and if you look at the website, it is. It is basically a very simple
way to buy and sell Bitcoin. – [Narrator] The company makes money by charging a small fee when
people buy or sell crypto, much like a currency exchange would if you were changing say euros to dollars. And it's these transaction fees that make up the fast bulk, 96%, of Coinbase's revenue and what has tied the
company's performance directly to those crypto markets. The company made some $322
million in profit last year as crypto gained more legitimacy among traditional investors.

– Over the last year,
it's become hip, right? Bitcoin's usage has been sort of codified. That really opened the door for a lot of professional money managers, institutional money, hedge funds to come in and start playing in this little exciting sandbox. – [Narrator] And then in 2021. – Crypto has matured to a point where we wanted to be able to share with all investors and all the public actually how far the industry has come and we thought one way we could do that was by going public.

– [Narrator] Rather than
going public for an IPO, the company has decided instead to do it via a direct listing, like companies like Spotify and Palantir. That means that they'll save the money that they would have
paid to investment banks but their shares will be sold by whoever currently owns them. So the company won't directly
make any money in the process. What makes Coinbase's
listing really unique is that it's the first time a listed company's stock performance will be so closely
linked to crypto markets. – This is the first direct connection between the capital markets
and the Bitcoin markets.

– [Narrator] While there are some small crypto-based companies that trade publicly in
the US and overseas, none handles as much crypto as Coinbase, which has some $223 billion
of assets on its platform. That's why its share price is expected to follow the path of its main currencies, Bitcoin and Ethereum. And that could provide
a unique opportunity for traditional investors. – You could almost look at the stock as an index on cryptocurrencies. If you are a mainstream stock investor and you really don't wanna
deal with Bitcoin itself, you can buy Coinbase stock.

It will be part of the
daily conversation now. What did Coinbase stock do today? Was it up, was it down? – [Narrator] Although crypto price swings can be enticing to investors
seeking high volatility, for Coinbase, having its share price tied to that fluctuating market
creates a lot of risk and may put off some investors. – If you think the Dow had a bad day, Bitcoin's was worse. – It wasn't just Bitcoin getting bashed. At one point, the global
cryptocurrency market lost over $100 billion in just 24 hours. – Equities going higher,
Bitcoin going lower. – [Narrator] In 2019, when
the price of Bitcoin fell, Coinbase lost some $30 million. – In Coinbase's regulatory filing for the direct listing, they had a very long section on risk. They understand that Bitcoin
is gonna go up and down. – [Narrator] And it's not just volatility that makes Bitcoin risky. The currency has a long checkered history of being linked to cyber
crime, hacking and theft. – Coinbase has never been hacked. I have to be clear about that. That's a really big deal. But if Coinbase was ever hacked, if their security was breached, if Bitcoins were ever outright stolen from the wallet that
people have on Coinbase, from their accounts, that would be a disaster for Coinbase.

– We always wanna keep
cybersecurity top of mind. We've got a cyber crime
insurance policy against that but it doesn't mean that cyber security is not a big, big threat we have to keep in mind all the time. – [Narrator] To try and
distance itself from the risks of Bitcoin, Coinbase says it has built out a $1 billion war chest and has started to offer
a wider range of products that it can sell to its consumers. – Coinbase, we're a retail app where people have their
primary financial account but we have an exchange underneath that, we have an custodian underneath that, we have an institutional business. We also have a commerce
merchant payments business. – They're prepared to
ride the ups and downs but they also wanna build a bigger boat to deal with those ups
and downs in the future. – [Narrator] Those investing in Coinbase are betting that Bitcoin
will continue to grow and gain more legitimacy but if the currency were to crash, as of now, that could be a big problem for the reputation of
both crypto and Coinbase. – I think it's really
important to remember that historically, Bitcoin
has gone through a few periods like this where the price
has gone very, very high and come crashing down.

Just because Coinbase is now public, just because Bitcoin's
perception has been changed in the markets, that doesn't mean that Bitcoin's never
going to go down again. (dramatic music).

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