The Coinbase IPO and ‘Digital Gold’ — Your Best Chance at ‘FU’ Money

Coinbase wants to list on the stock market by the end of the year.

In my opinion, this could be the most important IPO of the decade.

You see, we’re starting to enter the era of ‘self-sovereign’ money. And this company could be a key player in expanding this concept.

This new form of money is a paradigm shift that maybe only comes around once every few centuries.

But if like me, you’re sick of the corrupt financial middlemen whose constant meddling is causing so much grief these days, it could be our only chance to say ‘FU’ to the old system.

I’ll explain more on this shortly.

First, some background…

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The next big thing

If you haven’t heard of Coinbase, they’re a cryptocurrency wallet and exchange platform founded way back in 2012.

This makes them a crypto pioneer.

Today, they’re one of the most well-known and widely used crypto exchanges in the world.

They operate in 32 countries around the world serving 35 million users who trade and invest in cryptocurrencies like bitcoin and Ethereum.

They also offer custodial services for institutional clients, a potential missing piece of the puzzle in attracting ‘richer’ money into the crypto space.

In 2018 Coinbase had a private valuation of $8 billion and some reports estimated its 2017 revenue at around $1 billion. Though, this was a year of crypto mania and more recent revenue details are unclear.

But it’s a real business, with real revenues and real customers. And one of the few in crypto that has played along with the regulators along the way.

So, that’s the low down on the company.

But why do I think it’s such a big deal?

Isn’t this your stock standard fintech IPO?

Far from it…

When tech and gold collide

The external context is super important here.

As you know, there are two standout market trends right now: Technology and gold.

The Nasdaq Tech Index is a ‘winner’ — in the financial sense a least — from the COVID crisis and touched new highs overnight.

Port Phillip Publishing

Source: Incredible Charts

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Though it did pullback quite rapidly, after rallying 2%. As this tweet I came across put it:

Port Phillip Publishing

Source: Twitter

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The gold price looks set to breach all-time highs soon too. Which incidentally is causing a huge rally in small-cap gold miners.

Port Phillip Publishing

Source: Incredible Charts

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As you can see, we’ve just breached a seven-year range as speculators pile into gold stocks.

As I said, some commentators are saying both sectors are overheated now. That this is a blow off top before a rapid decline.

Maybe, maybe not. Time will tell…

I’d say use your caution here. If you’re bullish look for dips, rather than breakouts. If you’re bearish and want to short, well, here’s your chance!

But my question today is, why the huge investor interest in these two asset classes at the same time?

I mean, you couldn’t think of two different types of investment, could you?

Now here’s the thing…

Both the ancient and the ultra-modern are linked today in a strange way.

You see, in a weird way, they’re both seen by investors as a place of refuge.

Rampant money printing and interest rates at zero are devaluing the concept of cash. Simply put, it doesn’t pay to save and hold money in the bank.

And as more cash rains down on the economy, people are looking for ‘somewhere else’ to put it.

An era of super-cheap money actively encourages speculation in all kinds of assets. And you can’t get more speculative than tech stocks and gold miners.

It’s basically asset price inflation caused by money printing.

This is what makes Coinbase very interesting…

You see, it’s a tech company that trades in ‘digital gold’. That’s how I see the world of cryptocurrencies.

Bitcoin is of course the most well-known cryptocurrency. There will only ever be 21 million bitcoins. That’s not enough for every millionaire in the world.

But the idea of ‘digital gold’ goes well beyond just bitcoin.

A token on a crypto project has a verifiable scarcity value. A finite claim on part of the value generated by the project.

This makes certain tokens attractive both as a source of wealth creation and as future stores of value.

Of course, today many crypto projects are still very experimental, and no one knows what — if anything — their future value will be.

But after 11 years of experimentation, some projects are starting to get real life traction right now too.

Let me explain how…

DeFi’s takeover bid

Right now, the world of crypto is quietly using blockchain technology to completely reinvent the world of finance.

They call it decentralised finance — or DeFi for short.

And over the next few years, in my opinion, it will reduce the role of financial middlemen in much the same way as Amazon has reduced the role of shopfronts in retail.

The pace of development is so fast now that even I — a seven-year crypto veteran — have trouble keeping up sometimes.

But the key point is that this world of DeFi runs on new stores of value that combine the scarcity value of gold with cutting-edge technology.

In DeFi, token holders are rewarded for staking — a form of securing the network, for providing liquidity in liquidity pools, and even for voting on a project’s plans using a new form of ownership structure called a DAO (decentralised autonomous organisation).

This might sound like gobbledygook to you.

But the important point is that each of these tokens has a form of scarcity that drives value. Just like gold does.

Coinbase is listing in an era-defining moment in time.

A time when the masses are losing faith in the value of the money in their pocket. The rampant gold price shows you this is true.

But I think the world will cotton onto the idea of digital scarcity soon too.

And don’t forget this…

When it lists, Coinbase will be on the radar of every major brokerage house in the US as part of this listing process.

And that means a lot of eyeballs, with a lot of money, running the rulebook over the idea of digital scarcity and token valuation.

They mightn’t have been interested in crypto yet. But trust me, Wall Street are fast learners and they’ll move fast when they work out how value is captured in this new world.

And that’s why I think this will be the stock to watch over the next decade.

It’s valuation hinges on one game-changing trend: The rise of digital scarcity in a world fast losing faith in fiat…

Good investing,

Ryan Dinse,
Editor, Money Morning

Ryan is also editor of Exponential Stock Investor, a stock tipping newsletter that looks for the biggest investment opportunities on the market. For information on how to subscribe and see what Ryan’s telling his subscribers right now, click here.

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

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