Making sense of bitcoin

Coinbase, whose users primarily deal in bitcoin and ethereum, reported last week that its revenue soared 847 per cent in the first quarter to $1.8 billion, and that it now has 56 million verified users.

The company was created just over a decade ago and is now in the midst of a moment that many in the industry have described as a watershed. Nasdaq has set a reference price of $250 per share for Coinbase Global Inc.

The reference price is not an offering price for investors to purchase shares, but rather a benchmark for performance when the stock starts trading. The opening public price will be determined by buy and sell orders collected by the Nasdaq from broker-dealers.

The listing gains more significance as Coinbase, the talk of Wall Street, is making its debut through direct listing rather than taking the more common route of IPO (Initial Public Offering), a step that makes sense for the digital currency platform.

If one wants to buy a Bitcoin, one has two options: Deploy sophisticated, powerful computers to mine Bitcoin by solving complicated math problems or buy it on an exchange.

The former is costly and requires a lot of expertise while the latter requires nothing more than opening an account with an exchange. Coinbase is that exchange. For many crypto enthusiasts, Coinbase operates as a straightforward online exchange, allowing retail buyers and sellers to meet in the middle and find a price.

A day ahead of Coinbase listing, Bitcoin hit a record of $62,741, extending its 2021 rally to new heights.

The world's biggest cryptocurrency, which has growing mainstream acceptance as an investment and a means of payment, rose as much as 5 per cent on April 13, a day before Coinbase's listing. Ethereum also reached a record high of $2,205.

Major firms including BNY Mellon, Mastercard Inc and Tesla Inc are among those to have embraced or invested in cryptocurrencies. Bitcoin topped $60,000 early last month, fuelled by Tesla's move to buy $1.5 billion of the digital currency for its balance sheet.

The Covid-19 pandemic has forced governments to spend heavily on support measures and central banks creating lots of extra money to stimulate their economies, many investors worry about the inflation that this could cause, which would devalue "fiat" currencies like the dollar and pound.

Since bitcoin is designed to never have more than a maximum of 21 million in circulation, it is seen by these investors as a store of value to protect their wealth from this problem. But experts are divided on whether the listing will have positive or negative effect on the cryptocurrency.

Some bulls see Coinbase as validation for the nascent crpyto industry. Alex Mashinsky, head of crypto-lending and trading platform Celsius Network, believes that because Coinbase has more users and more revenues than many of the largest Wall Street players and is more profitable than any major exchange, its validation puts most skeptics at a crossroads as they have to re-evaluate their denial about the crypto.

Others suggest that it may put crypto prices under pressure after a precipitous rally in recent days and a fresh record for bitcoin. New world order...eh?