Coinbase (COIN) going public on Wednesday is a win for the crypto, experts say, adding that this will propel more industries to adopt it as a legitimate payment service, thus making it more mainstream.
The company, the largest cryptocurrency exchange in the U.S., went public on Wednesday afternoon, opening at $381 in its Nasdaq debut. Investors say it has a valuation that could run in excess of $90 billion.
Coinbase had earlier been expected to open at $340, Bloomberg reported.
Stefan Coolican, president and chief financial officer at Ether Capital, a Toronto-based asset management firm that focuses on ethereum, says Coinbase going public "shows crypto is getting further and further into mainstream use and adoption."
He adds that it's a natural investment for many generalist investors who may not get into crypto but want some exposure to the financial upside in an easy-to-understand business model.
In Canada, the acceptance of cryptocurrency as an official payments service started small with the likes of Simon Fraser University's bookstore letting students pay with bitcoin, and the town of Innisfil, ON, letting residents pay for property taxes with the digital currency.
In mid-February, the price of bitcoin shot to record high as more mainstream institutions viewed it as a legitimate asset. That same month, Elon Musk's Tesla announced it bought $1.5 billion in bitcoin, and later in March said payments for the electric vehicle can be made with the digital currency. North America's first exchange-traded fund (ETF) created to track the price of bitcoin began trading in February. In March, PayPal announced it would allow U.S. customers to use their crypto holdings to pay online merchants. That same month, Visa said it would allow payment settlements using crypto. Goldman Sachs also announced it is preparing to introduce cryptocurrency investment options.
Coolican made his first bitcoin transaction in 2015 and knew this form of payment was going to be a game-changer.
"People are starting to understand that and are starting to do things with crypto that you couldn't do within the traditional world. I could send you $20 million to somebody on the other side of the world and it would take 15 seconds to put on the blockchain. You'd wait a little bit to get it confirmed," he said. "You can do that with wire transfers but it would take two days if you're lucky."
Coolican speculates that in the future, there will be U.S. and Canadian dollar representations on the blockchain and people will be able to buy tokens for money, which can be withdrawn from in cash from the bank at any time.
"It's still early days," he said. "Right now I can send you $1,000, I could go to Coinbase, give them $1,000 U.S. and they'll mint me 1,000 USD coin on ethereum. If I want to send that to you I can but I need [to pay a transaction fee]. That's where the clunkiness comes in," he added.
"Imagine an e-transfer where you don't have to get two banks to agree."
Coolican says the boom in crypto also came about as a result of the COVID-19 pandemic shaking up financial institutions. As the economy takes a hit and seeing the way the government is spending money, people are starting to ask "how do I hedge myself against this potentially coming inflation?" he said.
"Crypto is sort of digital scarcity and bitcoin, it's like a form of gold. Traditionally people would flock to gold when they thought inflation was coming and now you have bitcoin, you have crypto, this provably digitally scarce asset class and it's a way to protect yourself," he noted.
Underlying technology will be used by traditional financial institutions
Alfred Lehar, an associate professor of finance at the University of Calgary, says Coinbase going public is a good development and that when more exchanges go public, they will be subject to greater regulation and scrutiny.
"This will be a win for everyone because exchanges can credibly commit to operate under strict regulatory standards and crypto investors can be assured that the exchange is better regulated," he said.
Lehar also says that the underlying technology which crypto uses will eventually be adopted by traditional financial institutions to make their systems more efficient and better, but adds that because it's still early days, there are caveats to its success.
"One of the problems, for example, if you lose your ATM card, you can go to a bank, show them an ID and get a new one. If you lose the private key to your crypto wallet, you're out of luck and there's no way you can recover any of the assets," he said.
Lehar explains that when more central banks adopt crypto as a form of payment, it will likely come with the forms of security which the digital payments system doesn't have at the moment.
"The technology is amazing but I think that some people are always excited about how much we can gain by cutting out traditional financial institutions. The existing financial institution is inefficient in parts and there's room for improvement. I think this new technology will bring some of that improvement," he said.