Daily Brief: Coinbase’s Stock Market Debut Proved Crypto’s In The Big Leagues Now

Daily Brief: Coinbase’s Stock Market Debut Proved Crypto’s In The Big Leagues Now

almost 3 years ago3 mins

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Coinbase – the world’s second-biggest crypto exchange – hit the US stock market for the first time on Wednesday, and investors were more than happy to usher in this new era of finance.

What does this mean?

Coinbase has been credited with bringing cryptocurrencies into the mainstream, and now that they’re more popular than ever, it might’ve figured its shares would be in high demand too. That paved the way for a “direct listing” – in which investors rather than investment banks set the share price – and the biggest stock market debut of any crypto firm so far.

Coinbase read the room right: investors initially priced its shares at $380, which is well ahead of the $250 “reference price” it went in with. That price puts the company’s value at around $100 billion – a neat step up from the $8 billion it hit in 2018.

Coinbase share prices

Why should I care?

For markets: Where bitcoin goes, Coinbase goes.

Coinbase makes almost all its revenue from trading fees – and since the bulk of those trades are in bitcoin, Coinbase’s fortunes are closely linked to those of the OG cryptocurrency. But the reverse is also true: bitcoin’s price hit an all-time high on Wednesday after Coinbase’s stock market listing proved that – love it or hate it – crypto’s in the big leagues now.

Bitcoin high

Zooming out: There’s a lot of competition out there.

Coinbase reckons investors were using its platform to hold 11% of all cryptocurrency assets by the end of last year, but it’ll have to work hard to defend that market share from its rivals. And we’re not just talking crypto exchanges like industry-leader Binance either: fee-free trading app Robinhood announced last month that it’s working on its own cryptocurrency wallet, which might make Coinbase – whose high fees give it huge profit margins – break out in a cold sweat.

Bitcoin balance on exchanges

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Goldman Sachs Reported Its Best-Ever Quarterly Results

Goldman image

Goldman Sachs had Reddit traders to thank for its best-ever quarterly results on Wednesday, so it mightn’t be long before the investment bank is posting its earnings entirely in gif.

What does this mean?

Goldman’s earnings didn’t just blow past expectations: they rocketed almost 500% versus a year earlier. That was down to a couple of things. First, the bank’s trading business, which had its best quarter in over a decade as Redditors pushed the sheer number of market trades to record highs. And second, the bank’s underwriting business, which makes money by helping companies “go public” through initial public offerings – a market that was red hot among tech firms and special-purpose acquisition companies (SPACs) last quarter. That segment saw its revenue quadruple from the same time the year before – hitting its own record high.

Net revenues by segment
Goldman Sachs Q1 2021 Earnings

Why should I care?

For markets: Big banks are starting to feel more relaxed.

Both JPMorgan and Wells Fargo reported expectation-beating results on Wednesday too, and they had a little something extra working in their favor. Both firms’ earnings took a knock last year when they set aside cash in case pandemic-hit borrowers couldn’t repay their loans, but now that the US economy is starting to rebound, they felt confident enough to reverse some of those provisions last quarter. That added a tidy $1 billion and $5 billion to Wells Fargo’s and JPMorgan’s quarterly earnings respectively.

Bank stocks and index
Source: The Wall Street Journal, FactSet

Zooming in: Goldman’s following the money.

Of the six biggest US banks, Goldman makes the biggest share of revenue from investment banking activities like trading and underwriting. That came in handy last quarter, sure, but it’s actually been holding the company back. Firms with big retail banking businesses, after all, have benefited from access to cheap money through customer deposits for the last decade – money they could then lend or invest to generate juicy profits. No wonder, then, Goldman’s working so hard to expand its own recently launched retail banking business.



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