Coinbase co-founder and CEO Brian Armstrong talking at TechCrunch Disrupt SF 2018.
Steve Jennings | Getty Images for TechCrunch
The pending Coinbase direct listing, scheduled for April 14th on the Nasdaq underneath the image COIN, is thrilling a broad base of the funding neighborhood outdoors the regular cryptocurrency crowd.
“Coinbase goes to blow individuals’s minds,” Matt Hougan, chief funding officer at Bitwise Asset Management, which pioneered the first cryptocurrency index fund, informed me. “I believe it is going to power conventional finance to wrestle with the phenomenal progress that’s going down in crypto.”
It’s not onerous to grasp why. Coinbase is probably going the greatest beneficiary of the cryptocurrency revival. Fifty-six million verified customers, with $1.eight billion in revenues in the first quarter alone, and a price that could possibly be anyplace from $50 billion to $100 billion.
That is an extraordinary valuation for an trade of any sort. By distinction, Intercontinental Exchange, which runs the New York Stock Exchange, has a market cap of $65 billion, whereas Nasdaq has a market cap of $25 billion.
That type of valuation is getting the funding neighborhood — and notably the exchange-traded fund (ETF) neighborhood — very excited.
Biggest crypto pure play
Cryptoassets have had the similar drawback that different scorching commodities (like pot or area) have had in the previous: a excessive diploma of curiosity with a notable lack of investible belongings. Coinbase, nevertheless, will go a good distance towards fixing that drawback.
“Coinbase will be the greatest public pure-play cryptocurrency firm, full cease,” Matt Kennedy, senior IPO market strategist at Renaissance Capital, which runs the Renaissance Capital IPO ETF (IPO). “I anticipate each crypto ETF will need (or want) to personal it in some unspecified time in the future, and it’s doable our ETF will be the first to personal it.”
It’s the similar story with Christian Magoon of Amplify, who runs the Transformational Data Sharing ETF (BLOK), which focuses on blockchain expertise.
“Being actively managed, we will purchase it the second it goes public, and we totally anticipate it will be in our portfolio,” Magoon informed me.
Other tech ETFs, notably Cathie Wood’s ARK Fintech Innovation ETF (ARKF), in addition to the Global X FinTech ETF (FINX), will even be probably consumers and that’s simply the starting: “You will see many extra ETF corporations submitting for crypto-type funds,” Magoon informed me.
Because possession of crypto by people and establishments remains to be pretty low, many consider the valuation of Coinbase will additionally encourage extra personal entities to go public.
“I believe we’ll see a gold rush for crypto equities as investors understand simply how briskly the ‘picks and shovels’ firms of the crypto ecosystem are rising,” Hougan mentioned.
Michelle Bond, a former senior counsel at the SEC who’s now CEO of the Association for Digital Asset Markets (ADAM), an affiliation of corporations in the digital market, mentioned the Coinbase listing “will break down headline obstacles as a result of this will need to be accepted by a conventional monetary regulator, guaranteeing transparency, integrity and disclosure.”
Of course, this implies extra gamers are coming, together with high-profile opponents. For instance, Bakkt Holdings, a digital asset market owned by Intercontinental Exchange, has entered into an settlement to mix with a SPAC, VPC Impact Acquisition Holdings.
Will the SEC lastly approve a bitcoin ETF?
While bitcoin ETFs exist in the U.S., they don’t immediately personal bitcoin. They personal portfolios of shares deemed to have publicity to blockchain expertise.
A bitcoin ETF that owns bitcoin is a long-awaited dream of crypto investors. The purpose: It will enormously increase the class of potential homeowners.
“A bitcoin ETF will present an simple, easy and environment friendly approach to personal bitcoin,” Som Seif informed me. He runs the Purpose Bitcoin ETF, which trades in Canada. “Just like gold, the storage and custody of bitcoin is exclusive. An ETF solves that drawback. Also it is like a stamp of approval: there’s institutional backing. The GLD [Gold ETF] modified the world when it got here out in 2004. It made it simple to personal gold as an asset class.”
He anticipates a bitcoin ETF will do the similar for bitcoin.
Several weeks in the past, the SEC acknowledged the receipt of Van Eck’s bitcoin ETF utility, which set in movement a 45-day regulatory evaluation interval. At the finish of that interval, the SEC should both approve, deny, or prolong the evaluation interval. Several different corporations, together with Fidelity, have additionally utilized for a bitcoin ETF.
Most observers consider the SEC will punt and search to increase the evaluation interval. The most interval is 240 days.
“The fee would not like doing new issues, and when one thing falls into that class, it provides the fee agita, so the angle is, ‘let’s take the most period of time,'” one longtime SEC observer, who requested to be nameless, informed me.
However, most bitcoin watchers consider late 2021 might lastly be the 12 months a bitcoin ETF is accepted.
“The greatest potential change is [SEC Chair nominee] Gary Gensler,” Magoon informed me, noting that Gensler has taught cryptocurrencies and seems extra receptive to a bitcoin submitting. He additionally famous that SEC Commissioner Hester Peirce, a Republican, has additionally been a supporter of a bitcoin ETF.
The greatest distinction, nevertheless, could also be enhancements in the safety of the bitcoin universe.
In 2018, the SEC, in a 3-1 choice, declined for the second time an utility by the Winklevoss brothers for a bitcoin ETF. The SEC particularly mentioned it was anxious about excessive value volatility and fraud in cryptocurrencies. It additionally famous that 75% of bitcoin buying and selling happens abroad on unregulated international exchanges that could possibly be manipulated.
All bitcoin watchers agree that the SEC should be happy that fraud and manipulation points have been addressed.
Hougan believes the crypto market has gone a protracted approach to deal with these issues.
“Just a few years in the past there was no regulated futures market, now there’s, and the volumes are a lot greater,” Hougan informed me. “There have been additionally no regulated custodians with insurance coverage, now there’s. We have made an enormous quantity of progress, whether or not now we have made it over the purpose line just isn’t clear, however we’re getting shut.”
Matt Hougan, chief funding officer of Bitwise Asset Management, and Christian Magoon, who runs the Amplify Transformational Data Sharing ETF (BLOK), an actively managed portfolio specializing in blockchain expertise, will be our friends on ETF Edge at 1 PM ET on Monday and on Halftime Report at 12:35 PM.
