Coinbase Listing Signals Digital Assets Maturity

Just over a decade ago, digital assets were a theoretical concept, announced to the world through an anonymous white paper. Today, a digital asset exchange is trading on the Nasdaq exchange with a market cap of $62 billion as of 4/14/2021, excluding options and restricted stock units.¹ Coinbase’s direct listing represents a watershed moment for the digital assets industry.

Coinbase Listing: A Digital Asset Landmark

Coinbase’s direct listing is the largest listing (IPO, SPAC, or otherwise) of any digital asset company in history, at valuations that reflect a direct competition with traditional exchanges.² In our opinion, a valuation at this level indicates the full scale of global digital asset adoption by both institutions and individuals.

Coinbase Valuation Rivals Traditional Finance Exchanges

Source: Factset as of 4/20/21. The Intercontinental Exchange operates financial and commodity markets, including the New York Stock Exchange. Nasdaq is a financial services corporation that operates stock exchanges.

Full year 2020 revenues for Coinbase were $1.28 billion and net income was $322.3 million.³ In its preliminary Q1 2021 results, Coinbase projected 2021 revenues of $1.8 billion and net income within $730 to $800 million.⁴ These estimates represent a massive spike in growth of both top and bottom-line revenues that exceed their full-year returns for the prior full-year.

With the listing of Coinbase, the market cap of publicly traded pure-play digital asset companies (as defined by MVIS and included in the composition of the MVIS Global Digital Assets Equity) rises to $207.4 billion as of 4/23/2021.⁵ MVIS defines pure-play digital asset companies as companies which (i) generate at least 50% of its revenues from digital assets projects; (ii) generate at least 50% of its revenues from projects that, when developed, have the potential to generate at least 50% of their revenues from the digital assets industry; and/or (iii) have at least 50% of its assets invested in direct digital asset holdings or digital asset projects. We believe, over the last few years, both revenues and valuations of publicly traded digital asset companies have exhibited strong growth trends.

Digital Asset Ecosystem Evidences Structural Growth

Source: VanEck, MVIS as of 4/26/2021. Revenues and market cap reflect pure-play digital asset companies as defined by MVIS and included in the composition of the MVIS Global Digital Assets Equity Index on 4/26/2021. The Index was not live prior to 3/8/2021.

This growth is not happening in a bubble. We view the digital assets industry as a long-term structural growth story. Digital assets are starting to mature, with adoption and support coming from both retail and institutional investors, including MicroStrategy⁶ and MassMutual⁷, which have both invested in digital assets.

Coinbase Enters the MVIS Global Digital Assets Equity Index

Although the MVIS Global Digital Asset Equity Index rebalances quarterly, index provider MVIS conducts a weekly review of companies that come to market for potential inclusion in the index. Given the state of the current IPO market, we believe that a fast-track inclusion pathway for newly listed companies would help to provide more complete exposure to digital transformation companies.

If a newly listed company meets the pure-play revenue requirements and closes its first week of trading above the $1 billion total market threshold, then the company will enter the index on the following Friday. This collapses the inclusion timeline to as few as five trading days, with a maximum of 10. Coinbase met the requirements and entered the index after market close on April 23, 2021.