Coinbase goes public

Coinbase happens to be one of the biggest and most credible crypto exchanges in the market and therefore, when it went public (with the ticker COIN) in April 2021, pretty much all major crypto coins shook wildly – some went skyrocketing while others dumped significantly.

Unlike most of the major companies that go public, Coinbase did not opt for an IPO initially. Instead, it started giving out shares directly via NASDAQ and this tactic has already been practiced by some big names, like Palantir and Spotify in the last few years.

The listing is not only a major milestone for the overall crypto industry but exhibits the true might of Coinbase as a crypto exchange.

To get an idea of their massive growth in the last few years, it is worth noticing that according to SEC, Coinbase generated a revenue of about $1.3B in 2020 alone – which happens to be roughly 2X growth from 2019.

Let’s explore how Coinbase, which was valued at nearly $100B at the time of listing, makes money and what’s the business model that has allowed them to reach this level.

• Basically, they do not charge you for keeping the currency in their wallets and it rather depends on the fees and commissions at the time of trading
• Margin fee: Aka spread, this fee allows them to make 0.5% per transaction (for all buy and sell orders). Plus, this rate may vary based on different market conditions and jurisdictions, thus allowing Coinbase to make even more money on margin trades
• Coinbase fee: This mandatory fee applies on all transactions, whatsoever and this is charged in addition to the margin fee. Since this fee is paid in percentage, the actual amount would depend on the amount you trade

Apart from the mainstream exchange-related services, Coinbase provides the following services as well:

• Coinbase Card: Although it is not quite mainstream yet, this service would allow the users to get a physical visa debit card and an application as well that would allow them to spend cryptocurrencies they hold on a variety of merchants, by converting their holdings to USD before settling the transaction
• Coinbase Commerce: This is a merchant-oriented software that allows them to accept cryptocurrencies for onsite and online business and works just like PayPal. Please note that this service is already mature enough that is being used on several e-commerce platforms
• USDC: This is the stablecoin offered by Coinbase and is a competitor of USDT. It runs on the Ethereum platform and each token is pegged to 1 USD, thus allowing it to sustain high volatility and provide an even more rational store of value for users who do not want their portfolio to experience fluctuations based on volatility

Despite these positive indicators and pretty straightforward business model, we have yet to see how the company performs after its public listing because since Bitcoin has soared in popularity, Coinbase has started facing tough competition from exchanges and other service providing startups in the crypto niche, such as Robinhood that does not charge any commissions.