One of the big stories in the crypto industry as of late is that Coinbase, one of the largest and most popular cryptocurrency exchanges in the United States, is going public. The trading platform confirmed its decision to file for a public offering late last year, and that offering could come to fruition as early as within the next few weeks.
The Coinbase Filing Is Set to Occur Soon
Everyone appears to be happy. Everyone seems to think that the move is going to place bitcoin along the same lines as stocks, and now everyone will have to admit that bitcoin and cryptocurrencies are legitimate and mainstream financial tools that must be taken seriously.
Well, almost everyone…
According to veteran stock analyst David Trainer, if Coinbase’s valuation is anything close to what experts are claiming it is, perhaps investing in the stock is something we should all avoid like the plague. As the CEO of New Constructs, Trainer’s job is to examine which stocks work and which ones don’t; which ones are likely to present valid opportunities for investors, and which ones are likely to disappear like the tulip craze of 400 years ago.
Trainer is claiming that the valuation of Coinbase is somewhere along the lines of $100 billion, which he is labeling as “far too high” thanks to boosts in market competition. Attaining profitability last year, this level of valuation suggests that Coinbase is likely to become the biggest crypto trading firm in the world based on its profit intake alone, though Trainer says it would be foolish to expect some sort of guarantee in this scenario given the strength and power of other trading platforms such as Kraken, Binance and even Gemini in New York.
What Will This Do to Competition?
What he thinks will happen is that many of these exchanges and others like them will follow closely what Coinbase is doing. They will ultimately decide to do the same thing; they’ll file for public offerings and boom! The competition will be way too much for Coinbase to handle. As a result, the exchange’s position as number one will swiftly come to an end. He states:
If stock trading fees are any indicator for crypto trading fees, we should expect them to quickly go lower if not to zero. Competitors such as Binance, Bitstamp, Kraken, Gemini and others will likely offer lower or zero trading fees as a strategy to take market share, which would start the same race to the bottom that we saw with stock trading fees in late 2019… The likelihood of Coinbase maintaining such high fees is quite low in a mature market.
For the year 2020, it was reported that as much as 96 percent of the trading platform’s revenue came from transaction fees, which is about 57 times higher than that of enterprises such as the Intercontinental Exchange.