Cryptocurrency and blockchain firms are attracting billion-dollar valuations as the space continues to see major investment in 2021. The likes of exchanges Coinbase and Kraken have had mind-boggling numbers attached to their plans to raise funds, with the former set to go public through a direct listing and the latter preparing for a lucrative fundraising round.
Since it formally announced its plans for a public listing, Coinbase has been tipped to be valued at around $28 billion by cryptocurrency analytics firm Messari. Meanwhile, news of Kraken’s efforts to receive investment from private firms in a new fundraising round saw insiders tout a valuation of $10 billion or more.
The sheer value of these investments is adding credence to the growing popularity of cryptocurrencies, with the total market capitalization close to $1.5 trillion. While investors have climbed directly into the crypto markets, others are looking for exposure to the biggest companies in the ecosystem with the prospect of major returns on investment in the future.
Kraken says $10 billion valuation is low
Cointelegraph reached out to Kraken to unpack its plans for a fresh fundraising effort in 2021, given that its last fundraising round through Bnk To The Future in 2019 amassed $13.5 million from 2,000 investors and valued the firm at $4 billion.
Two years later, Kraken is in talks with top investors that reportedly include Fidelity, Tribe Capital and General Atlantic. A spokesperson for the firm told Cointelegraph that the numbers being touted in initial reports may be underplaying Kraken’s actual worth: “We’re not going to speculate too much as to what the company is worth, but $10 billion would be a low valuation for us.”
Kraken also held back from outlining the specifics of how it would use the capital raised from investors but noted that it was in a very strong financial position and had received plenty of attention from potential capital lenders, with the spokesperson stating: “We’ve had a lot of inbound interest. Kraken is cash-flow positive and has a very strong balance sheet. If we were to raise new capital, it would be either for strategic reasons or to accelerate the pace of acquisitions.”
The company spokesperson also agreed that the appetite for investment in firms like Kraken is further legitimizing the crypto and blockchain space as a burgeoning sector that is building the future of finance and payment systems, adding:
“The cryptocurrency industry has reached a level of maturity and mainstream acceptance where an entry into public markets is beginning to make sense. However, this is still very much in the early days; Kraken, for example, is unlikely to consider a flotation until 2022 at the earliest.”
Lessons from the past
It has been three decades since the internet was unleashed onto the world, and those early years are comparable to what is happening in the cryptocurrency and blockchain industry. Many firms attracted major investment and fizzled out into nothing, while firms like Amazon went on to become global leaders in the space.
A similar trend was seen during the rise of initial coin offerings in 2017 as some firms with half-baked ideas attracted major investment but failed to deliver on the projects they started. Others, however, went onto build products and services that have been extremely successful, while many of the biggest cryptocurrency exchanges and payment service providers continue to thrive.
Mati Greenspan, founder of crypto advisory firm Quantum Economics, told Cointelegraph that a parallel can be drawn between the early days of the internet in the 1990s and the nascent blockchain and crypto space’s infancy in the 2010s. As Greenspan explained, forward-thinking investors ultimately have to weigh the potential risks and rewards of investing in emerging markets and technology:
“It’s quite amusing how big corporations have a tendency to resist new technologies. Both in the late 90s with the internet and throughout the twenty-teens with blockchain, we saw this kind of five stages of acceptance playing out. Ultimately, those who embrace new technology bear a risk but the rewards are often immense.”
Computer scientist Xinshu Dong, who co-founded sharding-enabled blockchain platform Zilliqa, echoed Greenspan’s sentiments of parallels between the dot-com bubble and recent developments in the cryptocurrency space.
Dong told Cointelegraph that some investments are made on speculative projections and unproven market demand, both during the 2017 ICO era and the current cryptocurrency market boom: “When the Dot Com bubble burst, 51% of the tech startups shut down and $1.7 T in capital was wiped.” He further added that while some firms like Pets.com closed up shop, numerous other companies like Amazon, Qualcomm and Cisco rose to prominence because “They offered ubiquitous services that survived the crash albeit with significant valuation dips.”
Dong said that hard lessons were learned, and many venture capitalists began investing in the technology space with more caution. Investors started backing founders with both ambitious visions and the ability to execute who were building for large market sizes. The growth of the decentralized finance space is a prime example of this change in investor behavior, according to Dong:
“Crypto is a blue ocean and the opportunities are still open for grabs. We see more investors starting to look for long-term outsized returns rather than chasing ‘hot deals’ at the moment. Teams who can be creative, execute their visions and be patient to find their product market fit will win the market share.”
Price tags aren’t surprising
The industry’s biggest firms attracting billion-dollar price tags is hardly surprising given the amount of investment that has gone directly into the cryptocurrency markets over the past six months.
Grayscale Investment’s various cryptocurrency trusts have seen billions of dollars pouring into its coffers, while mainstream institutions like MicroStrategy and Elon Musk’s Tesla have each bought more than $1 billion worth of Bitcoin (BTC).
With major institutional interest driving capital into the ecosystem, Greenspan believes that the valuations of firms like Coinbase and Kraken being touted by appraisers are backed by fundamental business performance metrics like user numbers and revenues and that investors are simply trying to gain first-mover advantage, as “Cryptocurrencies are finally being recognized,” with their potential becoming more apparent:
“Many of these firms are coming to the market with a substantial customer base and steady revenue streams, which is more than we can say about many of the hottest tech IPOs over the years. Still, with the amount of money recently printed and looking for a home, I think it’s clear that anything resembling an asset is fair game for the market.”
Joshua Frank, CEO of cryptocurrency data analytics firm The TIE, told Cointelegraph that the cryptocurrency space is not the only industry enjoying surges in price and value; however, the unprecedented growth of the crypto space means it’s not surprising to see these firms attracting billion-dollar valuations. “Nearly every asset has seen massive price appreciation over the last few months.” He further added: “Investors are looking for yield and are excited about the future for digital assets.”
Frank also highlighted the possibility of a knock-on effect for the rest of the industry as the biggest firms attract major investments. This, he believes, could actually influence the price and value of different cryptocurrencies: “If Coinbase IPOs at a $120B+ valuation what does that mean for Uniswap and other DeFi platforms?”
Ziliqqa co-founder Dong, however, questioned the accuracy of these valuations given the nascent stage that many cryptocurrency projects are now in: “The spillover effect is probably causing some projects to be overvalued just because they happen to be in a ‘hot’ sector.” He added further:
“Among all these layer one blockchain projects, people just don’t know which ones will eventually become the winners of users and applications, so many are just spreading their bets, while I’d think a select few of them will be much more valuable than the rest in the long term.”
Whether the numbers are a reflection of speculative fervor or in-depth appraisals, the biggest firms in the cryptocurrency space are clearly thriving. As these industry insiders and analysts have highlighted, investors are looking to make the most of interest and development in the space, and the overall outlook is positive for the future.
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Bitcoin At $100,000: Estimating The Chance Of Six Figure BTC In 2021
Bitcoin price (BTC) reached a new all-time high this week, soaring to almost $65,000 on Wednesday the 14th of April. With Bitcoin’s price now in “blue sky territory” and its market cap sitting comfortably around the $1.17 trillion level, the big question is – just how high will the current bull market push the BTC price this year?
Rounding Up The Most Famous Bitcoin Price Predictions
Here are some of the most famous individuals and institutions in crypto that have gone on record with bullish Bitcoin price calls:
In March, analysts at major US investment bank, JPMorgan, were reported to be eyeing a Bitcoin price of $130,000 – although no timeframe was provided for their prediction. JPM’s CEO, Jamie Dimon, was vocal in his criticism of Bitcoin in the past. However, the firm’s increasing involvement in crypto projects reflects the growing integration of cryptocurrency within the traditional financial sector.
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MicroStrategy’s CEO, Michael Saylor, is renowned for converting his firm’s cash reserves to Bitcoin and encouraging other corporate leaders to follow suit. At last count, MicroStrategy held over 90,000 BTC, worth approximately $5.5 billion at the time of writing. Unsurprisingly, Saylor is extremely bullish on the BTC price, saying in a March interview that he “can see Bitcoin going to a million… [or] five million.”
Pantera Capital, launched in mid-2013 as the original American crypto investment fund, has projected a Bitcoin price of $115,000 before September of 2021. Pantera’s call is based on the Stock to Flow (S2F) model of Bitcoin’s price, which has thus far shown a high degree of predictive power. Given the time-specificity of Pantera’s call as well as their transparency regarding its rational basis, we would consider this the most considered prediction.
Daily Bitcoin chart showing the bull run since late 2020 until present | Source: BTCUSD on TradingView.com
A Rally-Supportive Economic Environment
Predictions alone, no matter who makes them, aren’t enough to elevate Bitcoin to a six-digit price level. What’s needed are enthusiastic buyers and hodlers, whether they be individual investors or large institutions.
As to the latter, we’ve already alluded to MicroStrategy’s crypto corporate coffers. Perhaps following Saylor’s advice as presented to thousands of corporate representative, Time Magazine recently announced their own acquisition of Bitcoin.
Furthermore, with financial titans like BlackRock and MasterCard recently announcing their involvement in Bitcoin, there can be no doubt of the institutional appetite for » Read more
” href=”https://www.newsbtc.com/dictionary/satoshi/” data-wpel-link=”internal”>Satoshi’s invention.
The stock-to-flow model projects much higher prices for BTC | Source: Digitalik.net
Perhaps the most compelling reason driving investors, big and small alike, into Bitcoin is the expectation – and indeed the observation – of high inflation. With central banks around the world printing billions if not trillions of fresh fiat units as a response to COVID 19, the scene has been set for declining fiat value and rising costs for goods and services.
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With high inflation everywhere except government statistics – steel prices up 3x on the year, for example – it’s no wonder that demand for hard, deflationary money has never been higher.
Featured image from Deposit Photos, Charts from TradingView.com
Coinbase’s $86bn Valuation Has Been Grossly Exaggerated by Misleading Media
Coinbase shares closed at $327 on their Nasdaq debut, giving the crypto exchange an initial market cap of $86bn on a fully diluted basis.
Fully diluted refers to the total number of common shares outstanding and available to trade on the open market after all possible sources of conversion. But some feel this measure gives an inaccurate valuation as it includes options and restricted stock, therefore overstating the number of shares used in the valuation.
In the buildup to the IPO, some analysts expected Coinbase to achieve a $100bn valuation. While its closing valuation wasn’t a million miles away, it was still less than expected.
Coinbase Listing is a Watershed Moment For The Cryptocurrency Industry
Coinbase is the first major crypto company to test the U.S. public market. Its IPO was hailed as a turning point in cryptocurrency going mainstream. Analyst Dan Ives wrote:
“Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years in our opinion.”
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>COIN opened at $381 on the Nasdaq Global Select Market. Early on, buyers pushed the price as high as $429, but bears soon took over to dip the price as the day wore on. It ended the session at $327.
Source: COINUSD on TradingView.com
The firm had released some impressive figures before its public debut. It showed a spike in revenue and a doubling of its monthly active users from the previous quarter.
But market research firm New Constructs had already sounded the alarm on a severe overvaluation at $100bn. They believe a valuation this high takes no account of a future squeeze on its transaction margins.
the company has little-to-no-chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion.”
The Actual Valuation Should be $65mn
While Coinbase’s fully diluted valuation came in at $86bn, pretty much in the middle of pre-debut expectations of between $60bn – $100bn, CIO at Arca Jeff Dorman said this figure is grossly overstated.
Dorman slammed the media for “misinformation” and “horrible reporting,” saying they were using the wrong share count. Based on 198mn class A and B shares, Coinbase’s closing valuation should be $64.7mn.
“That math is wrong — There are 198mm class A and class B shares o/s, not 261mm. If we use fully diluted share count, then every stock on the planet has infinite shares due to no restrictions on how much stock a company can issue.“
On the matter of ever reaching a $100bn valuation, researcher Larry Cermak expects this to happen as long as the bull market continues.
“Direct listings almost always trade down in the next few days because of the high float that’s being dumped. As long as the bull market continues, it will eventually recover and go $100B+ IMO. Low volume today is somewhat surprising though.”
At this point, it’s unclear whether an overstated Coinbase market cap is a help or hindrance to crypto. While an overstated valuation is likely to drum up interest, the spin side sees additional pressure on Coinbase to live up to the hype.
ETH bonanza as three North American Ethereum ETFs approved in one day
While gaining exposure might still be difficult south of the US-Canada border, Canadian investors will shortly have a host of options to choose from to gain exposure to Ethereum (ETH) via an ETF as regulators have approved three different Ethereum ETFs in a single day.
Purpose Investments, Evolve ETFs, and CI Global Asset Management were all approved by Canadian regulators to launch Ethereum-backed ETFs today. The ETFs will be the first ETH ETFs in North America, and among the first in the world.
Some observers noted that all three being approved at once may have been part an effort not to give Purpose an “unfair advantage”. Purpose appeared to gain an edge after the launch of the wildly popular Purpose Investments ETF, the first North American Bitcoin ETF which quickly swelled to $1.3 billion in AUM while competitors waited for approval. Rival Evolve Fund Group’s Bitcoin ETF only managed to attract $100 million in AUM, despite launching only two days later than Purpose and offering 25% less management fees.
In a Tweet, a reporter for Bloomberg said that the CL Galaxy and the Purpose ETF funds will begin trading on 4/20 — a date he thought would please Elon Musk, given it’s marajuana culture connection. Likewise, Evolve’s ETH ETF — which they first filed for in March — will begin trading on the same day.
Updating yet again… @CIGlobalAsset & @GalaxyDigital just got approval for their #Ethereum ETF alongside @PurposeInvest‘s. I THINK both will begin trading on … wait for it … 4/20 — Amazing @elonmusk https://t.co/SNFY4jNpUa pic.twitter.com/4ZUSCJEVQ5
— James Seyffart (@JSeyff) April 16, 2021
The Canadian stock market has already demonstrated a significant appetite for exposure to crypto assets. Previous exchange-traded Ethereum products led to market halts on the first day of listing, and Purpose’s Bitcoin ETF cracked $100 million in its first day of trading.
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