Coinbase is the largest cryptocurrency exchange in the US.
- New Constructs CEO David Trainer said his calculations point to a valuation of $18.9 billion for Coinbase, well below the estimated $100 billion.
- Coinbase is set for a direct listing on the Nasdaq on April 14.
- Coinbase faces the risk of competitors driving down their fees in the young cryptocurrency market.
The potential $100 billion valuation of Coinbase Global ahead of the cryptocurrency exchange's trading debut is "ridiculously high," said New Constructs CEO David Trainer, with an outline from the veteran stock analyst including his view that the company's profitability faces the risk of being slashed.
Coinbase is set for an immediate posting on the Nasdaq trade on April 14. This week, the San Francisco-based organization assessed an over 800% bounce in first-quarter income to $1.8 billion from a year sooner yet noticed that it is "exceptionally hard to precisely gauge" income going ahead in view of market instability.
"Despite the fact that Coinbase's income flooded in the course of recent months, the organization has almost no opportunity of meeting the future benefit assumptions that are heated into its incredibly high expected valuation of $100 billion," said Trainer in an exploration note from New Constructs delivered Friday.
Coinbase is presently the biggest cryptocurrency trade in the US by income, and its foundation offers admittance to Bitcoin, Ethereum, and Litecoin, among other computerized monetary standards.
Coinbase is a champion among organizations with ongoing IPOs since it makes a benefit, said Trainer, with center income ascending to $317 million from about $17 million of every long term over-year.
In any case, generally, Trainer said his "computations recommend Coinbase's valuation ought to be nearer to $18.9 billion - a 81% abatement from the $100 billion anticipated valuation."
Among Coinbase's dangers is rivalry as the cryptocurrency market develops, and that could prompt exchange edges at the organization to fall "abruptly."
He highlighted sharp rivalry in late 2019 between financiers over stock-exchanging charges and said such a "rush to-the-base marvel" is probably going to arise among cryptocurrency trades.
"Contenders like Gemini, Bitstamp, Kraken, Binance, and others will probably offer lower or zero exchanging expenses as a procedure to take market share," he said. Additionally, if conventional financiers start offering clients the capacity to exchange cryptocurrencies, that would "definitely cut down on the unnaturally wide spreads in the youthful cryptocurrency market."
He said, for example, if Coinbase's revenue share of trading volume fell to 0.01%, which is equal to traditional stock exchanges, its estimated transaction revenue in the first quarter of 2021 would have been just $35 million, instead of the estimated $1.5 billion.
"The crypto markets are very young and we expect many more companies to compete for the profits Coinbase enjoys today," Trainer said.