- [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)