• With Coinbase’s direct listing scheduled for today, FTX’s contracts will wind down
  • Traders have added approximately 135% to the perceived value of Coinbase since FTX listed the contract

Coinbase’s direct listing, an event where those that hold private shares will be able to liquidate them to the public, is today and with that FTX’s pre-direct listing contract derivative product has wound down. 

As of Tuesday evening, the CBSE token was trading at $597, which translates to a valuation of just over $152 billion. Taking a look at the value traders prescribed to Coinbase puts the valuation at the high end of what analysts are predicting. 

Equity research firm New Constructs pegs the valuation at $18.9 billion, or a share price of approximately $75. On the opposite end, digital asset firm Delphi Digital estimates a valuation of between $160-$230 billion with the high end valuation producing a share price of $900. 

“The interest in Coinbase’s listing is undeniable, as regulators and major players are squaring off to build a bridge between crypto and traditional finance,” Sean Rooney, head of research for the asset manager Valkyrie Investments told Blockworks. “The pace of this interaction will determine whether Coinbase can live up to a $100 billion plus valuation, but the company will need to significantly increase revenue compared to 2020 to do so.”

According to reports, Coinbase is set to list at a $250 reference price. 

However it’s widely expected that the value of COIN will rise dramatically throughout the trading day as retail and institutional investors buy-in. FTX’s contract will expire at the end of the first trading day.

After the news about the listing reference price broke, traders pushed the contract price downwards after a high of $600.

FTX Coinbase Pre-Direct Listing Contracts
Source: FTX

In a piece published by Market Watch, New Constructs analysts cited fee compression, which is the product of a mature market, and a heavily reliance on bitcoin and ethereum trading volume, as reasons why Coinbase will be challenged to support a $100 billion valuation. 

“Competitors such as Gemini, Bitstamp, Kraken, Binance, and others will likely offer lower or zero trading fees as a strategy to take market share, which would start the same “race to the bottom” that we saw with stock trading fees in late 2019,” New Constructs wrote in their note. 

“Coinbase’s estimated transaction revenue as a percent of trading volume in the first quarter was 46 times higher than Intercontinental Exchange and Nasdaq. The likelihood of Coinbase maintaining such high fees is very low in a mature market,” New Constructs said.

All Eyes on COIN

Analyst firm Delphi Digital, on the other hand, gave a more optimistic view of the exchange’s fortunes. Kevin Kelly, a partner at the firm, wrote in a note that the exchange had a “phenomenal” growth in user signups at 30% quarter-over-quarter in Q1 2021 and it wouldn’t be “too far-fetched given current market conditions” for the stock to command above-average price multiples of $160-$230 billion. 

“The price of COIN will fluctuate greatly depending on forward guidance and growth expectations as well as the valuation multiple it winds up commanding,” Delphi Digital wrote noting that a lot was depending on its ability to attract millions of new users.  

As Blockworks has previously reported there isn’t exactly a consensus amongst retail traders as to if Coinbase is undervalued or overvalued—which is likely why the pre-direct listing contracts on FTX trade towards the upper third of valuations but not at the top. 

On one hand, stakeholders interviewed by Blockworks said that the exchange was “undervalued” at $77 billion and this didn’t reflect the ubiquitous integration of digital assets into the global economy. However, the regulatory burden of being a publicly-listed US-regulated exchange might also prevent it from reaching its full potential as Braden Perry, a former CFTC attorney, previously told Blockworks. 

“This ongoing and ever-changing regulatory environment hinders well-designed compliance and regulatory plans,” Perry previously said.

Looking back at some of the hottest IPOs of the last two years, such as Uber and Airbnb, regulatory compliance isn’t something the market is overly concerned about. Maintaining fees and user signups is seemingly more material, but this is something that’s going to be priced in down the road as the market matures and not on COIN’s opening week.

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    Sam Reynolds is a Taipei-based reporter, covering digital assets and regulation throughout Asia. Before joining Blockworks he was an editor at Forkast News and an analyst with IDC.