Coinbase, one of the most well-known names in the cryptocurrency ecosystem, has filed for an initial public offering (IPO). In a short blog post on its site, the San Francisco-based company stated that it had submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (SEC). The Form S-1 will be made public after the SEC reviews and approves the statement.

Key Takeaways

  • Coinbase has submitted a draft registration statement to the SEC in preparation for an IPO.
  • The San Francisco-based crypto exchange's fortunes are tied to the price of Bitcoin. Its revenues ballooned in 2017 on the back of a rally in crypto markets but they have shrunk in size since.
  • It has a valuation of more than a billion dollars in private markets.

While crypto miners and Bitcoin holding companies are already listed on the markets, Coinbase’s public offering will be the first of its kind for a company that, for some retail investors, is synonymous with Bitcoin and cryptocurrencies. It will also shed light on the workings and traction for cryptocurrency exchanges, arguably the pivotal hinges of a crypto infrastructure that is still being built.

The cryptocurrency exchange’s decision to file for an IPO comes in the midst of a rally in crypto markets. Bitcoin's price surpassed the $20,000 mark on Wednesday and set a new record, blowing past $23,000, earlier today. More importantly for Coinbase’s business, institutional investors, who dismissed the crypto mania of 2017, have changed their opinion about crypto markets and are pouring money into the ecosystem.

Success Built on Bitcoin's Price

Started by Airbnb alum Brian Armstrong in 2012, Coinbase has become one of the most recognizable names associated with Bitcoin and cryptocurrencies. The company’s stated goal is to create an open financial system and it mainly derives revenues from two sources: its operations as a crypto exchange catering to retail customers and institutional investors, and its custody business, which offers custodial services for cryptocurrencies to banks and institutions. Based on trading volume figures, Coinbase Pro – the company’s institutional trading arm – is North America’s biggest crypto exchange.

The flipside to this success is that the firm’s fortunes are inextricably tied to the price of Bitcoin.

Per an earlier Bloomberg report, Coinbase had $17 million in revenue in 2016. That figure ballooned to $923 million by the end of the following year on the back of skyrocketing prices for cryptocurrencies.

The subsequent slump in cryptocurrency prices affected Coinbase’s revenues and operations. The company is estimated to have made $520 million in 2018. It also laid off 30 employees, shuttering its Chicago office. The prolonged pain of low Bitcoin prices meant more layoffs in 2019. Earlier this month, Coinbase's UK division reported a sharp drop of 22.5% in 2019 profits from the previous year.

In September, Coinbase offered an exit package to employees and five percent of its workforce are reported to have taken it. Despite the pressures of a turbulent crypto market and uncertain regulation, however, Coinbase claims to have remained profitable since 2017.

According to Crunchbase, Coinbase has raised $547.3 million from an assortment of venture capitalists, institutions, and prominent individuals, including the likes of Andreessen Horowitz and former Citibank CEO Vikram Pandit. In private markets, the company is considered a unicorn, meaning it has a valuation of more than $1 billion.