The Grand Opening
Today all eyes are on Coinbase and their IPO through direct listing. Today’s events mark a significant step forward for many reasons. Not only will the listing be one of the largest on record, and the first truly major IPO in the digital asset space, the fact that it will go public via direct listing and not through a traditional IPO process is another sign of the evolution of the investment banking industry. Rather than utilizing Wall Street firms to place large blocks of stock with select clients at a steep discount to anticipated valuation, a process through which banks generate huge fees and trade favors with their best clients, everyone will have an equal shot at purchasing shares when the stock opens for trading. This process on the whole seems significantly more efficient and democratic than a traditional IPO process, but it also carries more volatility risk.
There has been a lot of talk over the last two days as to whether the upcoming IPO is responsible for driving the recent reemergence of the rally in BTC and other crypto. While there is certainly a correlation in timing, it is unclear whether the two have a causal relationship. One thing is certain, and that is that the listing is creating a significant amount of buzz and anticipation. That alone might be helping to propel crypto prices higher, as more eyes are drawn to the asset class. The other certainty is that the rally to new highs in crypto prices that we’ve seen this week will be a significant boost to enthusiasm for Coinbase stock, and will likely amount to a windfall for private shareholders who sell on the open market today.
Are investors snapping up BTC in anticipation of COIN, or are holders of COIN private stock who are intending to sell snapping up BTC, perhaps just to keep exposure to the asset while divesting some of their shares or in an effort to generate buzz and boost the price of the offering, or are the two entirely unrelated? Will retail traders, who have been credited with fueling much of the equity rally from the lows of 2020 but have been fading from the spotlight for the last 2 months, return with excitement to snap up shares? Is a valuation of a crypto exchange at 5% or more of the total market cap of all crypto combined justified?
These are all questions circulating through trader’s minds right now. And their hypothesis about each of them will drive their trading decisions in both spot crypto as well as COIN shares today. It’s unlikely that we’ll get definitive answers to any of them today as we will have to allow the markets time to work through price discovery and settle on a consensus. Until then, it’s likely to be a wild ride, so strap in tight!
About Kapil Rathi
Kapil is the Co-Founder and CEO of CrossTower. He is a financial services industry veteran, having previously held senior leadership roles at NYSE, Bats, ISE and Cboe. Prior to founding CrossTower, Kapil was the Chief Operating Officer (COO) at AlphaPoint. His background also includes product and technology leadership roles at NYSE, AT&T, and Aithent. Kapil’s accomplishments include managing four equity options exchanges at Cboe, launching a new options exchange at Bats, and building multiple innovative trading products at ISE. Kapil holds an MBA from Fordham University.
CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.