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19 April 2021

Coinbase Flotation Another Triumph for Bitcoin

By now it’s no secret that cryptocurrencies are one of the hottest commodities in the investments sphere. In fact, the global cryptocurrency market is now worth an eye-watering US$2.2tn, US10bn more than the world’s most valuable company, Apple.

For what is often described as an extremely volatile market, this valuation suggests that despite its volatility, cryptocurrencies are here to stay. As the hype surrounding currencies such as Bitcoin and Dogecoin continues to gather momentum, the platforms on which these assets can be bought and sold grow too.

Now, Coinbase, one of the top exchanges for Bitcoin, has gone public on the US Nasdaq, earning a market value of almost US$100bn (£72.5bn). Founded as recently as 2012, when each Bitcoin was worth just US$4.80, the company now has more than 56 million users in over 100 countries and held US223bn in user assets at the end of March 2021, when each Bitcoin was worth around US$59,000.

This arguably demonstrates traders’ changing attitudes towards investments and industries as Coinbase’s valuation ranks it above oil giant BP in terms of market value.

As of last Wednesday, Bitcoin alone had a total market value of £1.2bn, with the price of one Bitcoin rising to an all-time high ahead of Coinbase’s listing on the stock market. The price of Bitcoin has skyrocketed by more than 1,000% since April 2020. A host of companies, including Mastercard and BlackRock, are exploring the possibility of integrating digital currencies into their businesses. However, one company has embraced Bitcoin like no other.

Tesla, owned by long-time cryptocurrency advocate Elon Musk, bought US$1.5bn in Bitcoin in February 2021 and unveiled plans to accept it as a payment method for its products. Tesla made the investment, which at the time pushed the price of a single Bitcoin above US$44,000, for “more flexibility to further diversify and maximise returns on our cash,” the company said. The move to accept Bitcoin as payment for its products made it the first automaker to do so.

However, as part of the announcement of its investment in Bitcoin, Tesla warned investors that the currency, like the wider market, is exteremly volatile. Bitcoin lost 75% of its value in 2018 and, despite its global hype, there is no reason why this may not happen again.

While the future of cryptocurrencies and the wider market is hugely uncertain, it appears that interest in this area will not go away any time soon, and with Coinbase going public on the Nasdaq, it offers a pathway for other cryptocurrency firms to do the same.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Coinbase Flotation Another Triumph for Bitcoin

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