The Coinbase direct stock listing could be a rite of passage for the blockchain and cryptocurrency industry, and the announcement on March 20 by the United States Commodity Futures Trading Commission of a $6.5-million fine against Coinbase for “wash trading” and filing misleading information probably won’t do more than postpone by a few weeks the distinction of being the first crypto-native corporation to be listed on a major U.S. stock exchange.
But questions surround Coinbase’s upcoming debut on the Nasdaq exchange: Is the crypto exchange really worth the $100 billion — as suggested by a pre-IPO public auction? Is its timing propitious? Are the firm’s revenues too dependent on the market price of Bitcoin (BTC) and Ether (ETH)? And are its profit margins really sustainable — is this really an industry breakthrough event, and if so, which crypto enterprise might be next to test Wall Street’s waters?
But first, what is one to make of charges of improper reporting of exchange volume and “self-trading” that were settled with the CFTC? Could they scuttle the listing?
“The CFTC announcement should not really derail investor interest with the Coinbase direct listing,” Edward Moya, a senior market analyst at forex trading company Oanda, told Cointelegraph, mainly because “mainstream acceptance has arrived for cryptocurrencies.” Any fines will have only a short-term effect in his view. Indeed, they might even, in a way, reassure potential investors, providing further confirmation that the space is regulated, Moya told Cointelegraph.
Kavita Gupta, founding managing partner at Delta Growth Fund LP & Fintech.TV and visiting scholar and lecturer at Stanford University, appeared to agree. “As an investor, I would read it as a positive sign that Coinbase is clearing up any possible issues before going public and would play fair to regulatory bodies and the public investors,” she told Cointelegraph.
On the other hand, the fine could impede the listing process, suggested David Trainer, CEO of investment research firm New Constructs, though the fine is relatively small, suggesting that the illegal activity may be seen as relatively inconsequential — “so it might not pose much of an issue in the grander scheme.” That said, “an issue with trading integrity for an exchange is serious — no matter how big or small,” he commented to Cointelegraph.
“The fine is just a slap on the wrist for Coinbase,” declared Bobby Ong, co-founder and chief operating officer of crypto data aggregator CoinGecko, told Cointelegraph, adding: “It was cited as a risk factor in the Coinbase S-1 filing, and this settlement removes one risk factor.”
Perfectly weighted up?
Back in December, Moya told Cointelegraph that Coinbase’s initial public offering was “perfectly timed” given Bitcoin’s growing investment appeal. Has anything changed?
Not really. “Institutional and retail interest is still in the early stages of mainstream acceptance, and this is the peak time for a bullish perspective with cryptocurrencies,” answered Moya, adding further: “Eventually, over the next few years, governments will clamp down on Bitcoin and push their respective digital coins, and that could lead to concerns that the Bitcoin party is over. […] The pressure is on for Coinbase to go public.”
“It’s a great time for Coinbase to test waters,” commented Gupta. IPOs and the special purpose acquisition company IPO markets are still sizzling; cryptocurrencies have soared in recent months; there’s enormous liquidity; “and demand in the market for tech companies creates the best time for Coinbase to ring the bell.”
But, how much would Coinbase be worth as a publicly owned company? As noted, one pre-IPO valuation put the company as high as $100 billion — is that realistic?
Vladimir Vishnevskiy, director and co-founder of Swiss wealth management firm St. Gotthard Fund Management AG, told Cointelegraph that the $100-billion valuation could be justified given the potential of the digital asset sector and “the impact it could potentially have on our lives in the future.” Moreover:
“If market participants are willing to entertain price targets/predictions for Bitcoin in the $300K–$400K range, is a $100-billion valuation for Coinbase so overstretched?”
Moya, too, was optimistic, though not quite ready to swallow $100 billion. “Coinbase’s market value will probably settle around the $80 billion–$90 billion range, but that could easily change with whatever is the next 20% move for Bitcoin.”
Trainer, by comparison, was skeptical. “A more realistic valuation is probably closer to a 10%–25% of the current valuation,” Trainer told Cointelegraph. “Others have gone so far astray because they lack a reliable fundamental perspective to give them a sense of value according to the underlying economics of the business and its long-term competitive position.”
Along these lines, New Constructs analyst Kyle Guske wrote recently regarding the $100-million tag that “the expected valuation implies the company will become the largest exchange in the world by revenue” — something that’s unlikely, given the rising competition in the cryptocurrency exchange sector and the non-sustainability of Coinbase’s current market share and revenue margins, in his view.
Coinbase’s current ratio of transaction revenue to volume is 0.57%, for example, 57 times higher than margins at Nasdaq and Intercontinental Exchange — both with ratios of 0.01%. Guske wrote:
“If Coinbase’s revenue share of trading volume fell to 0.01%, equal to traditional stock exchanges, its 2020 transaction revenue would have been just $20 million, instead of $1.1 billion.”
Cutting out investment banks
Coinbase’s offering would be the Nasdaq’s first direct stock listing, where a company sells shares directly to the public, without using investment banks as intermediaries as with traditional IPOs. Investors would be able to sell their Coinbase’s shares immediately after purchase, too, without the usual lockup period. Some have suggested that a direct listing was also consistent with the crypto ethos of cutting out the intermediary.
Vishnevskiy called the direct approach a “smart move,” adding that it could be popular with retail investors, particularly in light of the GameStop saga. He agreed, too, that it is in line with the anti-establishment sentiment often expressed within the cryptoverse, saying:
“One could also interpret this as an indication of what is to come — i.e., the old ways giving way to new — and it will be the leaders of this new digital revolution setting the game rules, not the other way around. I am convinced there is no bank on Wall Street that would have refused the underwriting business for this listing if it was offered to them.”
“Direct listings are the much fairer way to distribute shares,” commented Trainer, while Moya, for his part, said Coinbase had no choice but to opt for a direct listing because a traditional IPO would have delayed going public until closer to the end of the year. He added: “The retail interest for Coinbase’s direct listing will be very strong, and yes, sticking it to the middleman provides some traders with a bit of added satisfaction.”
Will a successful Coinbase offering spur other blockchain and cryptocurrency companies to go public? “After the Coinbase IPO, there will be a rush of other crypto companies looking to go public either via IPO or SPAC to tap on the frothy valuation offered by the public markets,” said Ong.
Vishnevskiy, too, expected others in the industry to follow with IPOs, though they could find Coinbase’s offering “a difficult one to emulate,” adding: “There are just not many other companies in the industry yet with the same pedigree and history as Coinbase, which is exactly why so many investors want to be part of it.”
Who might be next? “I could certainly see Kraken being a contender for a listing this year, however, whether they could command a similar multiple in terms of valuation will be a big question,” said Vishnevskiy, while Moya answered:
“I’m not tracking any specific private blockchain companies but would probably start looking at SoluLab and OpenXcell and eventually Binance will consider a direct listing.”
Are there other possible obstacles to a successful Coinbase debut as a public company? Vishnevskiy expected the Coinbase listing to be over-subscribed. “The number of shares being offered is not that significant, and I expect high demand from both institutional and retail investors.” The only potential roadblock ahead, he said, would be a decline in general market conditions: “Markets over the past month have been choppy, and if the mood does turn sour in April, it could dampen risk appetite slightly.” Ong added: “It is always risky in the weeks leading up to an IPO,” but he didn’t see any significant roadblocks leading up to Coinbase’s listing.
Still, the crypto exchange has been dogged by service outages periodically through its history, a complaint that was raised again this week in a New York Times article: “The company sometimes still struggles to address basic customer service complaints,” said the paper, and quoted attorney David Silver that if Coinbase wants to be “the Goldman Sachs of crypto,” then it “needs to maintain quality customer support.”
Meanwhile, Neil Wilson, chief market analyst for Markets.com trading, noted in a client letter at the time of Coinbase’s S-1 SEC filing that the firm’s earnings are inextricably tied to crypto prices. Indeed, most of Coinbase’s net revenue is from transactions in just two crypto assets: Bitcoin and Ether — and the volatility of those cryptocurrencies could make Coinbase’s earnings soar or plummet accordingly.
Indeed, the company itself acknowledged in its filing: “If demand for these crypto assets declines and is not replaced by new demand for crypto assets, our business, operating results, and financial condition could be adversely affected.”
Gupta, too, acknowledged that Coinbase had exposure to crypto, and “crypto price volatility impacts their business” in terms of revenues, liquidity and other areas, but she viewed this as another positive connected to the direct listing, as it might guide other crypto-native firms looking to follow in the exchange’s footsteps:
“How their [i.e., Coinbase’s] public stock [shares] weather bull and bearish markets would provide a roadmap for lots of blockchain companies to explore IPOs as a potential liquidity and fund raising route.”
A milestone industry event?
Overall, should this still be viewed as a significant event for the blockchain and cryptocurrency industry — one that could spur more crypto adoption and/or blockchain technology innovation?
The Coinbase Nasdaq listing “will be a watershed moment for the entire blockchain and cryptocurrency industry,” said Ong. It has already shown Wall Street how large the crypto industry is, “and they have certainly woken up to the potential opportunities in this industry.”
Any offering of Coinbase’s projected size will “inevitably motivate more people and firms to try and get a piece of the action,” said Trainer, and “can only help to propel the blockchain and cryptocurrency industry further.”
Speaking as an investor — indeed, one playing now in the SPAC IPO market — Gupta stated that “Coinbase will be the torchbearer for the whole blockchain community in the public market,” adding: “If you look at [crypto] exchanges across the world from Israel to India to Singapore, every exchange pitch is [based on the claim] that ‘it is the Coinbase’ of its region.”
According to Gupta: “Companies like CoinShares have already tested the water in more friendly European market exchanges,” while in the U.S., mining firm Bitfury’s SPAC IPOs have been oversubscribed. Events like these signal “great timing for Coinbase,” whose technology and revenue exceed many other IPO candidates in the United States.
Overall, a Coinbase Nasdaq listing would “put cryptos at the heart of Wall Street,” Wilson told Cointelegraph. Blockchain and cryptocurrency firms would no longer be outsiders looking in — rather, they would now be “part of the club.”
Reef Finance’s Schedules Mainnet Release for May, Promises Polkadot Integration
Reef Finance has announced that its Substrate-based mainnet will see the light of day in May 2021. Called Reef Chain, it promises to “make DeFi easy” by enabling developers to use a highly scalable and fully EVM-compatible network that’s integrated into the Polkadot ecosystem.
Reef Chain Coming in May
Reef Finance is a cross-chain DeFi operating system allowing traders to access liquidity from centralized and decentralized exchanges through its smart liquidity aggregator and yield machine. The project outlined the date for its long-anticipated mainnet launch in a press release shared with CryptoPotato.
According to it, Reef Chain will be launched next month after finishing the final checks of the current Maldives testnet. The precise date will “depend on the result of the rigorous tests being conducted right now, though the team is confident that they will be completed soon.”
Upon its release, Reef Chain will enable DeFi developers to produce scalable and EVM-compatible systems integrated into the Polkadot ecosystem. Reef’s new product will be rolled out as a standalone blockchain based on the Substrate framework. This feature will simplify the integration to the Polkadot parachain network.
The mainnet’s compatibility with EVM, meaning developers can write contracts in Solidity or Vyper and deploy them on the chain, and its ability to bridge with other blockchains, including Ethereum, should enhance its interoperability features.
No Better Timing
Denko Mancheski, CEO of Reef Finance, outlined Reef Chain’s launch as perfect timing because of the “insatiable” demand for DeFi and the issues he sees with the current ecosystem. More specifically, those are the record-high transaction costs on the Ethereum network and even the struggling lately Binance Smart Chain.
Apart from promising scalability and deeper liquidity integration, Reef Chain is also “committed to helping out developers in their quest to bring their DeFi idea to life.” It plans to do so by enabling them access to Reef’s user base, network partners, investors, exchanges, and media.
“We know the struggles of up and coming developers all too well, and a lot of the time, technical skills are only a part of the equation. By tapping into Reef’s business network, DeFi builders will multiply their chances of success.” – concluded Mancheski.
CEO of a Turkish Crypto Exchange Thodex Reportedly Runs Off With $2 Billion
Nearly 400,000 users of a Turkish cryptocurrency exchange were left out of their accounts without being able to withdraw their funds. The platform’s website has been down for several days, while reports suggest its CEO has already fled the country with up to $2 billion.
Turkish Exchange Does a Rug Pull?
Bloomberg reported yesterday that Thodex, a Turkey-based crypto exchange, has ceased trading, citing an “unspecified partnership transaction.” The founded in 2017 trading platform issued a statement explaining that all services will remain shut down for about five working days. However, the message reassured customers that they shouldn’t worry about their funds.
Approximately at the same time, though, users started to complain about their inability to access their own assets. Some took it to Twitter to exemplify the absurdity of the situation.
A local #Crypto exchange where I’d ~20% of my entire trading capital got rug pulled
-20 days no withdrawal (fiat & crypto)
-Then the website went offline
-Then the CEO run abroad
I’m not broke, but it hurts… Alot
It sucks, Even when u deal with regulated exchanges#Thodex
— Feras_Crypto (will Never DM you First) (@FeraSY1) April 21, 2021
More recent coverages asserted that the exchange’s chief executive officer and founder, Faruk Fatih Ozer, who refrained answering comments before, had fled the country.
Users Alleging of Fraud
Upon the news of Ozer’s alleged escape from Turkey, users of the local exchange hired a law firm to file a complaint against Thodex. Oguz Evren Kilic, representing an unspecified number of Thodex customers, confirmed the development, saying, “we have filed a legal complaint on Wednesday.”
He speculated that the funds on the Turkish exchange could be worth “hundreds of millions of dollars,” keeping in mind that the user base is just shy of 400,000. A prosecutor in Istanbul has reportedly launched an investigation.
According to another report, Thodex’s CEO and founder has run away in Thailand with an estimated amount of roughly $2 billion.
It’s worth noting that Turkish authorities have already taken a steep approach towards the cryptocurrency industry. CryptoPotato informed last week of the country’s latest rule on digital assets, banning users from using them as payment instruments from April 30th.
Chainlink is uniquely placed to play this out in the market
2021 has been a good year for Chainlink, the project growing leaps and bounds over the past few months. What’s more, LINK has continued to build on its foundations from last year, with the altcoin surging up the charts over the past few months. In fact, on the back of the wider market’s bullishness, LINK touched a new ATH on the charts just a few days ago.
At the time of writing, however, the aforementioned bullishness had given way to a wave of corrections, with the altcoin trading at a price level that was 18% away from its ATH.
What does this mean then? Has LINK’s price rally finally exhausted itself? On the contrary, a closer look at factors such as ecosystem-centric developments, metrics, and technical fundamentals would suggest quite the opposite.
The most crucial of these ecosystem-centric developments came to the fore a few days ago when the project released the whitepaper for its next protocol upgrade – Chainlink 2.0. As the DeFi sector’s leading decentralized oracle provider, this is a significant development, especially in light of the inflows that have been moving into DeFi over the past few months.
The whitepaper in question proposed a roadmap of Chainlink’s future, one which sought to address the limitations that were part of the initial whitepaper. Smart contracts with limited functionality, for instance. According to a recent report by OKEx Insights,
“Chainlink 2.0 addresses these limitations by enabling hybrid smart contracts in DONs — allowing blockchain protocols to access off-chain data sources and perform off-chain computations.”
What’s more, 2.0 also seeks to make oracles much more scalable, with the addition of the ability to perform off-chain calculations and the introduction of a “transaction-execution framework for Decentralized Oracle Networks which processes off-chain transactions and oracle reporting.”
Finally, Chainlink 2.0 will also be a step towards strengthening privacy protections on the blockchain network with the addition of confidentiality-preserving adapters and support for confidential layer-2 systems.
Needless to say, this a major update, one that could have major repercussions on the value of LINK on the price charts. However, contrary to expectations, when the paper was first made public on the 15th of April, the altcoin’s market failed to react. In fact, it corrected instead.
Why? Well, because the rest of the market corrected too on the back of Bitcoin’s depreciation and fall below the $60,000-level. In doing so, what can be argued is that LINK’s price is yet to price in the aforementioned development. This means that when the bearish phase passes and consolidation ensues, there is potential for a lot more upside in the Chainlink market.
In fact, it can be hypothesized that LINK, more than most altcoins in the space, is better placed to see more upside in its price action in the near term. This, because despite how it has performed over the past week, LINK’s fundamentals remain pretty strong.
Consider this – According to Glassnode, the top 1% of LINK addresses now hold over 84.44% of the altcoin’s supply, a 3-year high. This finding is a testament to the accumulation trend in the Chainlink market, one that underlines the confidence the market’s whales have in the alt’s long-term credentials.
Further, LINK’s Exchange Outflow Volume (7d MA) also touched an ATH of $3,753,855.00 recently, with the same suggesting that more and more people are now moving their crypto-assets off exchanges to HODL, with these unlikely to be sold anytime soon.
Here, it’s worth noting that in the past, whenever this metric has risen, the altcoin’s value has fallen on the charts immediately after. However, LINK’s price has also touched higher highs whenever recovery has ensued, meaning, this could be a sign to buy in.
Finally, the number of active LINK addresses also surged to a 1-month high in the last 48 hours, despite the general market bearishness another sign of there being a lot of optimism associated with the alt’s price performance.
It’s no wonder then that many in the community expect the cryptocurrency to reignite its rally in the near term, especially since traditionally, the cryptocurrency has maintained a lower correlation with the king coin, when compared to the likes of Ethereum and Litecoin. This, coupled with its strong fundamentals, might allow LINK to surge again, independent of the rest of the market.
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