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808 Insights
 

808 Insights is a newsletter that takes a look at different topics related to finance, economics, markets, and more.
 

Topic for today:

- Some Thoughts About The Coinbase IPO

1.

Sending this off-cycle newsletter to give a few thoughts about the upcoming Coinbase IPO…

As you may or may not know, Coinbase – the largest cryptocurrency exchange in the US – is going public on Wednesday, meaning that you will be able to buy Coinbase ($COIN) stock at any regular brokerage like Robinhood, Schwab, Fidelity, ect.

In advance of the IPO, Coinbase released 2021 Q1 earnings numbers recently and they were quite remarkable. Coinbase boasts over 56 million verified users and earned revenue of $1.8 billion and net income of over $700 million – just in the first quarter of this year! These are extremely impressive numbers.

Coinbase is going to have a ~$100 billion valuation as it IPO’s. There is real hype for this stock too, to a degree that has actually surprised me. Everyone seems interested in getting a little Coinbase stock. I would not be shocked if the price goes up much higher.

It sure sounds like I’m bullish on the stock. So am I going to buy any? Well…

Here’s the thing – I can’t see any way that Coinbase stock outperforms Bitcoin itself over a medium to long term time horizon. In the short term, sure, it might outperform. But over a longer time span, like 3 or 5 years? For me, it’s hard to imagine COIN doing better than BTC. Compared to Bitcoin, Coinbase has more regulatory risk, tougher competition, and less upside (this is my opinion - feel free to let me know by email if you disagree).

What it comes down to for me is this: are you looking to make a quick flip on Coinbase and make some easy profit? Sure, go ahead and buy into the IPO. I’m not much of a trader though. I like to just buy and hold for the long term. So I think I’ll be sitting out the Coinbase IPO. In the big picture, like 5+ years, I see more risk and less reward than just holding BTC.

Side note: There are some rumors spreading that Walmart may have bought a billion dollars worth of BTC during Q1 2021. Stay tuned as official Q1 earnings begin to come out over the next month or so...



- Sean M. Cover

 

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