Coinbase can be a bridge to traditional finance

This week two tweets popped up in my Twitter stream. For those of you not familiar with Twitter, it is a social media platform where you can send out tweets on most subjects, while following others who tweet on subjects you like. Ostensibly, that’s it.

Within the cryptocurrency industry and I am being specific here in naming it an industry, Coinbase is like marmite. It doesn’t conform to the purists, the Bitcoin maximalists and old timers, who see cryptocurrency as “outside” traditional financial systems. This group would not buy a single Scottish Widows product for example. On the other end of the spectrum, there are the Wall Street types, hedge fund managers and financial advisers who want cryptocurrency to become more mainstream and see Coinbase as an enabler for this - almost a bridge to traditional finance. That bridge is about to span across the globe as Coinbase has filed with the Securities and Exchange Commission [SEC] in the USA to become a public company. For crypto nerds, investors and supporting businesses this is a major milestone in bringing “mum and dad” into the crypto-sphere.

Filing an SEC-S1 means Coinbase will list or IPO this year. The founders will all no doubt become billionaires. Well done them for being entrepreneurial and building something special. But, it is the wider context of this IPO that has Wall Street excited and creates a stronger argument for Bitcoin to gets its first ETF. Bitcoin is the leading cryptocurrency by market capitalisation and many have tried over the past decade to obtain ETF status for it, with no luck. Bitcoin is not easy for big institutions or investment houses to hold, so by investing in Coinbase, the likes of Scottish Widows can “enter” the crypto market in a manner they are used to.

Analysts are already examining how well the Coinbase listing will do. $70B to $100B is the guesstimate on the opening bell. Perhaps $350 a share to kick off. Regardless, this stock, when it comes to market, has all the hallmarks of the typical big tech stock flotations. Facebook etc have all done well and while Coinbase is a completely different business model, it has the potential in terms of network effects, to be a big performer in Wall Street. Coinbase is at the epicentre of the bull market that’s sweeping the crypto industry and its user interface has been built so that “yer granny” can get to grips with it easily. I would argue that this is its secret sauce.

More to follow on this particular IPO, but as Twitter drew my attention to Scottish Widows and Coinbase, it made me think about how progressive this juxtaposition actually is. How long will it take until Coinbase has an allocation within traditional companies investment portfolios like Scottish Widows funds?

This will not be the last crypto IPO either to potentially enter a portfolio near you….

Jim Duffy, MBE, Create Special