Dennis Hammer is a writer and finance nerd with six years of investing experience. He writes about personal finance for Wealthsimple. Dennis also manages his own investment portfolio and has funded several businesses in the past. Dennis holds a Bachelor's degree from the University of Connecticut.
Coinbase’s IPO is a big moment for the cryptocurrency industry and the source of a lot of conversation in the investment community. In this article, we’ll help you understand how Coinbase operates, why people like it, and how to buy shares.
What is Coinbase?
Coinbase is a US-based cryptocurrency exchange founded in 2012. It’s a secure platform for buying, selling, transferring, and storing digital currencies. It’s one of the first crypto platforms in the world and a favorite with first-time crypto investors.
Coinbase originally allowed only Bitcoin trading, but has since expanded to include Ethereum, Litecoin, Bitcoin Cash, XRP, and others, and it promises to add more in the future. It also offers a self-hosted crypto wallet, a debit card that lets you spend any asset in your Coinbase portfolio, tools for business to accept crypto, and plenty of educational resources.Get started with Wealthsimple Trade. Sign up today and start building your portfolio with a free stock.
What is Coinbase’s current market cap?
As of May, 2021, Coinbase’s market cap is $52.382 billion. Market cap refers to the total dollar value of a company’s outstanding shares. This includes all the shares owned by stockholders, company officials, and public investors. We use this metric to gauge the value of a stock.
When is the Coinbase IPO Taking Place?
Coinbase’s IPO took place on April 14, 2021. This is when it became open for trading on the Nasdaq to the general public.
Coinbase’s IPO is not the traditional kind. It opted for a direct listing, meaning it can only float their existing shares, as opposed to creating new shares through a typical IPO. This also means it did not dilute the existing equity of its shares and was able to avoid some of the typical expensive requirements of filing an IPO.
Why are people interested in buying Coinbase shares?
Coinbase is a unique company that’s managed to thrive despite strong rivals in a competitive market. It operates in a blossoming industry, but with a familiar (and time-tested) business model: charging fees for transactions.
Unlike typical brokerages, Coinbase allows you to secure direct ownership of your cryptocurrency. You can purchase crypto and then move it to your offline wallet. Other platforms don’t allow the transfer of crypto off the platform unless you sell it off.
Users like Coinbase for its security, simple platform, and prompt customer service. The Coinbase Card lets users spend their crypto anywhere. They can even earn interest off the crypto stored in their Coinbase account through a lending process called staking.
Most importantly, investors like Coinbase because it helps legitimize Bitcoin, Ethereum, and other cryptocurrencies as valid forms of commerce. Those interested in crypto see this as a sign that digital currencies have become mainstream.
How can I buy shares of Coinbase?
Now that the IPO has happened, shares of the company are available for purchase. Here’s a basic overview of how to buy shares of Coinbase.
Step 1: Open a brokerage account
A broker is a financial institution that allows retail investors to buy and sell shares of stocks and other financial products. Before you can trade stocks, you must open an account with a brokerage. When choosing a brokerage for trading, it’s best to go with one that offers the following:
Low commissions and fees. (Make sure you understand the fee structure.)
A simple and easy to use trading platform. (You want something you can use effectively that doesn’t overwhelm you with information.)
Access to other securities and financial products in case you decide to invest in them someday.
If you already have an account with a brokerage, you can probably use it to purchase shares of Coinbase, as long as it allows you to trade stocks.
Step 2: Decide how many shares you want
Once you’ve opened your brokerage account, your next step is to decide how many shares of Coinbase you’d like to purchase. Divide the amount you want to invest by the price of each share. For instance, if the price is $200 a share and you’re willing to invest $4,000, you can purchase 20 shares ($4,000/$200 = 20).
Like any stock, purchasing Coinbase shares comes with some risk. Never invest more money than you can afford to lose. There’s no guarantee that the value of the stock will increase. We strongly recommend diversifying your portfolio with different kinds of securities to reduce the risk of losing everything.
Step 3: Choose your order type
There are multiple ways to purchase shares of any stock. You’ll need to decide how you’ll buy your Coinbase stock before you can execute the order. This can affect how much you’ll pay for each share. You have two options here:
Market order: This is an order to trade the stock at the current price when the order reaches the exchange. Once the order is submitted, you don’t have any control over the actual price at which the order is filled. An order for a popular stock like Coinbase will probably fill quickly at a price close to your order price, but there are no guarantees.
For example, if Coinbase is currently $240 a share and you place a market order, you’ll likely pay something close to $240 (with some slight fluctuation).
Limit order: A limit order is an order to buy or sell a security at a specific price. For purchases, limit orders are only executed at the limit price or lower. For sales, limit orders are executed at the limit price or higher. This gives you control over what you buy, but might take longer to execute.
For example, let’s say Coinbase is currently $240 a share and you place a limit order to purchase shares at $200 a share. Your order will only be fulfilled when the price falls to $200 or less.
Step 4: Execute the trade
Once you’ve chosen how many shares you want to buy and the order type you’ll use to buy them, your final step is to execute the trade. Your broker will handle everything else. Soon the money will be deducted from your account and the shares should appear.
If your broker can’t fulfill the order that day, it may leave the order open indefinitely or cancel the order when the markets close at the end of day. This depends on your account preferences.
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