We’re getting a bit ahead of ourselves

Last Wednesday, cryptocurrency exchange creator Coinbase launched its highly anticipated direct stock offering (as opposed to a traditional initial public offering) to great success and excitement. As cryptocurrencies like Bitcoin and Ethereum become increasingly accepted by major institutional investors and custodians (like the Bank of New York), the public offering of the main gateway for fiat currency (USD, EUR, JPY, as examples) was a big deal and a smashing success. However, when one looks at the valuation, over $90 billion on a fully diluted basis, we think that the stock, COIN, is following a troubling trend.

Using the valuation of relatively new electric vehicle makers like Tesla and cannabis companies, such as Grow Generation and Tilray, investors seem to be making two assumptions:

  1. The underlying new markets will mature and be fully up and running in the very near future.
  2. The companies in question will dominate their market with no consideration given to major existing players, or new players grabbing significant market share.

 

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