Is Coinbase Worth $8 Billion?

October 4, 2018 / by Bill Noble

Word on the street is that profitable U.S. exchange Coinbase will be raising additional funds at a valuation of $8 billion. The first round is $500 million, and that seems to likely lead to an IPO.

Being a crypto centric firm, we certainly think a profitable Coinbase IPO could create at least as much excitement as recent software and cannabis IPO’s. If Tilray’s market cap briefly exceeds that of American Airlines in late September (source: Bloomberg), then anything is possible when it comes to Coinbase valuation.

With both a potential Coinbase IPO and a Bitmain IPO in progress, it might be a good time to remember what an IPO is from the standpoint of venture capital investors.

Venture capital firms get in early on firms like Coinbase. The IPO process allows insiders to gradually cash out while also allowing early stage investors to cash out even faster.

Said differently, an IPO allows smart money to unload an investor onto the public. In many cases, the public is considered by smart money to be the unsuspecting fools who wind up paying wildly high prices.

It’s not an exact parallel, but one example of this “bigger fool” theory can be seen with the ETC Trust that started trading in June. Enthusiastic retail investors more than doubled the price from $26 to $67 in the first month of trading. As of 10/3/2018, the price was $11.90.

Bottom Line: It’s up to the market to value Coinbase. It is up to us to remind buyers to think about who the seller is before diving in. This goes for everything from IPO’s to BTC.