Not so long ago, cryptocurrencies like Bitcoin were derided by many financial-world sceptics as a flash in the pan; a folly for aspiring anarchists and investors with an outsized appetite for risk, not to mention a cloak for criminals engaging in nefarious online activities.
Well on Wednesday, crypto doubters received another major blow, when digital currency exchange Coinbase Global Inc became the first major crypto-centred startup to start trading on a United States exchange.
Coinbase’s debut on the Nasdaq is a watershed moment for the rapidly evolving cryptosphere – an ecosystem that includes digital currencies, and other digital assets such as nonfungible tokens or NFTs. It also ecompasses firms working to decentralise finance and disrupt other industries with distributed ledger technologies like blockchain that eliminate the need for middlemen to verify transactions and ensure provenance.
Coinbase went public via a direct listing that allows existing shareholders to directly sell those shares to the public.
Trading under the ticker symbol COIN, it opened for trading on the Nasdaq at $381 a share and quickly climbed as high as $429.54 before losing steam to close at $328.28, or roughly 14 percent lower than its opening price.
But even the closing price for Coinbase blew away the Nasdaq’s listing reference price of $250.
The landmark listing of the US’s largest cryptocurrency exchange comes as the world’s largest cryptocurrency, Bitcoin, is accelerating its march towards becoming a mainstream form of payment.
The pace started picking up in October when PayPal Holdings announced it would launch a service to let US customers buy, hold and sell cryptocurrencies directly from their PayPal accounts, and soon enable customers to pay for purchases in crypto.
Then in January, Tesla chief Elon Musk gave Bitcoin his stamp of approval when he added #Bitcoin to his Twitter profile. Not long after, Tesla disclosed that it had brought $1.5bn worth of Bitcoin and would soon allow customers to start buying Teslas with it- a pledge it started making good on last month.
Other companies have also started amassing Bitcoin, while major investors – and small ones, too – have been getting in on the action as well, adding Bitcoin to their portfolios.
Those investments have been on a meteoric winning streak this year. One Bitcoin was worth around $29,000 at the start of January. On Wednesday it smashed through $64,000 – propelled most recently by the heat around the Coinbase listing – before giving back some gains.
Crypto’s growing appeal with a wider swathe of investors has also gotten a pandemic boost, as near-zero interest rates designed to shore up the economy make riskier assets and their potential for bigger payoffs more appealing. Many also see crypto as a store of value as inflation picks up along with vaccinations and reduced restrictions.
But crypto is also famously volatile. Previous run-ups in Bitcoin, for example, have been followed by spectacular busts that have seen values plummet by some 80 percent.
In February, US Treasury Secretary Janet Yellen told The New York Times that Bitcoin is an “inefficient” way to conduct transactions, and said she worried about the “potential losses investors could suffer” given its history of volatility.
Buying shares of Coinbase is one way for investors to get a slice of crypto action without buying coins or tokens directly.