Why Coinbase going public is important for investors and the crypto market

CNBC’s Bob Pisani breaks down why Coinbase on deck is so important for investors and the crypto space with Matt Hougan of Bitwise Asset Management and Christian Magoon, CEO of Amplify ETFs. Subscribe to CNBC PRO for access to investor and analyst insights on crypto and more: https://cnb.cx/2BT2E7y

The pending Coinbase direct listing, scheduled for Wednesday on the Nasdaq under the symbol COIN, is exciting a broad base of the investment community outside the usual cryptocurrency crowd.

“Coinbase is going to blow people’s minds,” said Matt Hougan, chief investment officer at Bitwise Asset Management, which pioneered the first cryptocurrency index fund. “I think it’s going to force traditional finance to wrestle with the phenomenal growth that is taking place in crypto.”

It’s not hard to understand why. Coinbase is likely the biggest beneficiary of the cryptocurrency revival. It had 56 million verified users, with $1.8 billion in revenues in the first quarter alone, and a value that could be anywhere from $50 billion to $100 billion.

That is an extraordinary valuation for an exchange of any type. By contrast, Intercontinental Exchange, which runs the New York Stock Exchange, has a market cap of $65 billion, while Nasdaq has a market cap of $25 billion.

That kind of valuation is getting the investment community — and particularly exchange-traded fund investors — very excited.

Biggest crypto pure play

Crypto assets have had the same problem that other hot commodities (like pot or space) have had in the past: a high degree of interest with a notable lack of investible assets. Coinbase, however, will go a long way toward solving that problem.

“Coinbase will be the biggest public pure-play cryptocurrency company, full stop,” said Matt Kennedy, senior IPO market strategist at Renaissance Capital, which runs the Renaissance Capital IPO ETF (IPO). “I expect every crypto ETF will want (or need) to own it at some point, and it is possible our ETF will be the first to own it.”

It’s the same story with Christian Magoon of Amplify, who runs the Transformational Data Sharing ETF (BLOK), which focuses on blockchain technology.

“Being actively managed, we can buy it the moment it goes public, and we fully expect it will be in our portfolio,” Magoon told me.

Other tech ETFs, particularly Cathie Wood’s ARK Fintech Innovation ETF (ARKF), as well as the Global X FinTech ETF (FINX), will also likely be buyers, and that is just the beginning. “You will see many more ETF firms filing for crypto-type funds,” Magoon said.

Because ownership of crypto by individuals and institutions is still fairly low, many believe the valuation of Coinbase will encourage more private entities to go public.

“I think we’re going to see a gold rush for crypto equities as investors realize just how fast the ‘picks and shovels’ companies of the crypto ecosystem are growing,” Hougan said.

Michelle Bond, a former senior counsel at the SEC who is now CEO of the Association for Digital Asset Markets, an association of firms in the digital marketplace, said the Coinbase listing “will break down headline barriers because this will have to be approved by a traditional financial regulator, ensuring transparency, integrity and disclosure.”

Of course, this means more players are coming, including high-profile competitors. For example, Bakkt Holdings, a digital asset marketplace owned by Intercontinental Exchange, has entered into an agreement to combine with a SPAC, VPC Impact Acquisition Holdings.

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Why Coinbase going public is important for investors and the crypto market

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Kane Dane