From Bitcoin’s creation in 2008, to the Mt. Gox hack; from the bull run of 2017, to DeFi summer 2020; there are already a few significant moments in crypto’s history. Today we might be staring down the barrel of something different — crypto’s potential ‘Watershed Moment’: Coinbase going public.
On April 14, Coinbase will be the first cryptocurrency exchange listed on the Nasdaq Stock Exchange, giving investors an opportunity to buy nearly 115 million shares of their Class A common stock.
- However, this IPO is a different model. Most IPOs allow existing stakeholders to sell their shares directly to retail investors first, but Coinbase decided to stick to the crypto ethos by taking out the middleman. The public offering will be a direct listing, where brokerages or investment banks (existing stakeholders) won't be involved in the sale. Investors who purchase the stock will be able to buy shares directly from Coinbase and have the opportunity to sell them immediately.
While many are excited about Coinbase being the first IPO in the crypto world, others are speculating on what might happen afterward. Will this be the moment where crypto takes off into a cycle like the dot.com bubble, or will it be a colossal dud? No one really knows, and speculation runs rampant as we lead up to the 14th.
- For some perspective, there is a similar parallel that took place before the dot.com bubble in the mid-1990s. In 1995, Netscape went public, setting off a chain-reaction of new investors placing their bets on the future of the Internet and tech. Many made, millions, but, as we all know, it eventually came crashing down. However, there was a caveat and silver lining.
- From the fall of Pets.com and Netscape emerged corporations like Google, Amazon, and eBay, becoming the biggest companies in the world and bringing in a new era of tech to Wall Street.
Will the Coinbase IPO start a monumental shift for the cryptocurrency industry like Netscape did in 1995 for the internet? Well, we’re about to find out…
- The Netscape IPO is considered to mark the beginnings of the dot.com boom of the 1990s. This ended poorly for many companies in the Internet bubble. For example, who can forget Broadcast.com, Lycos, Altavista, and Yahoo! being the number one search engine before Google?
If you were around during the late 1990s and early 2000s, you might remember these names, but most companies ended up in the graveyard, acquired and merged to bigger companies, or just flat out went out of business when the bubble burst. However, the Netscape Moment is credited with launching the Internet boom, where we saw companies like Apple, Google, eBay rise to total market dominance.
- This IPO changed the landscape of Wall Street, causing a major rush of never-before-seen investors buying stocks in technology and other nascent Internet software, which feels similar to crypto’s boom and bust cycles we’ve seen over the past decade or so. The New York Times called the Netscape IPO, “the best opening day for a stock in Wall Street history for an issue of its size.”
Even renowned venture capitalist John Doerr referred to it as the “Netscape Moment” in 2010, referring to a stock listing that captured the public’s eye like never before, opening up floodgates to other companies being listed right after their successful public offering.
*“There are occasionally events that signal the arrival of a new force in culture (say, the Beatles on The Ed Sullivan Show) or serve as the demarcation line between historical eras (September 11, 2001, for example). The Netscape IPO was just such a moment in time,” Brian McCullough, wrote in his 2018 book, How the Internet Happened.
- Another connection of note is Marc Andreessen, one of the co-founders of Netscape, who also went on to start venture capital firm Andreessen Horowitz. He not only was an original investor in Coinbase in 2013, but was also named a board member at Coinbase last year.
- Andreessen went on to create one of the largest angel investment firms in Silicon Valley that invested in the likes of Facebook, AirBNB, and helped Coinbase conduct a Series B round that raised $25 million in 2013.
- So will Coinbase’s IPO be the ‘Netscape Moment’ for crypto? The momentum appears to be there, especially with a valuation of $100 billion and shares expected to trade between $300-350.
Dominoes Falling Toward DeFi?
Coinbase will be the first crypto company to go public that will potentially bridge the gap between traditional finance and crypto on Wall Street. There will be many others that will follow in their wake and go public, similar to the Netscape IPO, where tech and Internet stocks minted millionaires overnight.
Although many crypto companies wanted to go public in the past, there weren’t any good examples quite yet, because a lot of regulatory issues needed to be figured out before going public. These unknown factors were indeed a barrier for blockchain projects in the past.
- This moment is significant because it bridges the gap between the crypto world and traditional finance. There were a lot of fears on Wall Street before about crypto, and I think these fears mostly came from the unknown. Tthis is exactly where we find ourselves today: on the precipice of what many consider a revolutionary technology.
Many on Wall Street do not fully comprehend the significance of crypto and blockchain, but over the last couple of years, we have seen regulators taking the effort to understand this technology.
- A great example is when the Office of the Comptroller of the Currency (OCC) officially implemented cryptocurrency guides for banks and future payments back in January. Coinbase’s IPO shows that Wall Street has enough understanding of the crypto now, and that they are comfortable enough now to open their arms to crypto projects. And I don’t think they will stop here.
This will definitely have a positive impact on DeFi. Coinbase will bring awareness to traditional investors and high-net-worth individuals. Soon they will learn about the benefits of DeFi. This will bring traditional funds into the crypto world which will further boost the Total Value Locked for DeFi.
- There is still a lot of room for DeFi to grow even bigger. So let’s do the math: the current total value of global equity markets is $95 trillion and the total TVL in DeFi is around $50 billion today, meaning even if the DeFi market grows 1000 times in the next 2-3 years, it won't even be 1% of the entire market. The key to cryptocurrecy’s growth is to bring traditional funds into crypto, especially when they can see the money and capital growth that traditional finance can’t even touch.
Crypto is primed for a great future, especially when open finance and crypto native financial devices are being crafted and executed every day. This is indeed an exciting time to be alive and working in crypto.