Cryptocurrencies

Binance's US Affiliate Sets Sights on Joining Coinbase as Crypto’s Wall Street Presence Grows

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Following Coinbase’s (COIN) 2021 listing, Binance.US is set to become the latest cryptocurrency exchange to make waves on Wall Street as the company raises some $200 million in a seed funding round with an upcoming IPO firmly on the cards. 

Following its funding round, the U.S. arm of the world’s largest cryptocurrency exchange has been valued at $4.5 billion, and Binance's first ever external funding round attracted investments from VC firms like RRE Venture and asset manager VanEck among other key industry players, according to a company statement. 

According to Binance.US CEO, Brian Shroder, the company will seek to launch its IPO in two to three years, following the unprecedented move by Binance to secure external capital. 

“I personally feel that there is value in going through the process of going IPO because it requires a lot of regulatory discussions and those are things we welcome and are excited about,” Shroder told TechCrunch, whilst noting the merits of opting for an initial public offering. 

Although it would be reasonable to expect a company like Binance to launch an IPO, rival exchange Coinbase chose to go for a direct listing, helping the company to bypass the need for an underwriter. 

In raising capital, Binance’s investors included diversity and inclusion-based firms like LGBTQIA+ investment syndicate, Gaingels, as well as Gold House, which is a nonprofit that enables more multicultural representation and equality. 

Launched in 2019 as a separate legal entity from Binance.com, Binance.US has become one of the biggest crypto exchanges by trading volume in the U.S., with a 24-hour volume of $318 million. Based on trading volume, Binance.US is ranked within the top 10 global crypto exchanges, and is the largest country-specific exchange in operation. 

The key appeal for the exchange is its relatively low transaction fees, which is capped at 0.1%, according to Shroder, and it decreases based on the more volume that someone trades. Binance’s major counterpart, Coinbase, for instance, charges around 0.6% for trades below $10,000. 

Learning from Coinbase’s listing

In April 2021, Coinbase became the first major cryptocurrency exchange to debut on the stock market. Arriving on the NASDAQ under the ticker COIN, the listing coincided with Bitcoin’s post-halving event rally which saw the asset’s value climb to an all-time high of around $63,600 on the week of the exchange’s direct listing. 

Unfortunately for Coinbase, less than one month later the cryptocurrency market had experienced a heavy crash that would ultimately wipe off more than 50% of the entire market’s capitalization in a matter of weeks. 

As a result, COIN’s share price fell in line with the market and despite a brief recovery in November as Bitcoin rallied to a fresh all-time high, the stock is currently trading at more than 60% less than its debut price. 

Despite Coinbase’s struggles, there can be some lessons for Binance to take from the exchange’s first year on Wall Street. Most notably, Coinbase’s movements have closely traced the performance of Bitcoin and the entire market cap of the cryptocurrency industry

With this in mind, the two to three year timeframe for Biance.US’s IPO may be telling. Bitcoin’s halving cycle, which is programmed to reduce the volume of BTC given to miners by 50% on an approximate four-year basis, has historically resulted in rallies that lead to new all-time high values for a number of cryptocurrencies

Maxim Manturov, head of investment advice at Freedom Finance Europe notes that “Cryptocurrency prices will be influenced by two key multidirectional factors. On the one hand, cryptocurrencies are becoming more deeply embedded in economic relationships across the global economy. With their huge potential, crypto exchanges are valuable long-term investments. In the short term, however, investing in them is somewhat risky. This year has been a year of widespread rate hikes by central banks, especially the US Federal Reserve. Such actions by regulators are always accompanied by a sell-off in tech companies, which includes crypto exchanges. This was one of the key factors behind Coinbase’s decline. Therefore, it is possible that we will see the price of Blockchain.com and Binance securities decrease within one year after the IPO."

With the next Bitcoin halving event scheduled for 2024, Binance’s future IPO may come at a time when the industry will be ripe for growth and further adoption. 

Binance’s big ambitions for the future of crypto

Binance, the parent company of its U.S. arm, has also been flirting with the notion of launching an IPO in the future, but Founder and CEO Changpeng Zhao, speculated that as a much larger company, far more research would be required to look into where it could become a publicly traded firm. 

Speaking at a forum in Singapore in November 2021, Zhao noted that the future for the company may involve more of a hybrid approach to crypto and traditional stocks. “To be honest, in five, 10 years, we might see crypto exchanges merge with stock exchanges,” Zhao explained

However, Zhao was also keen to play down his involvement in the U.S. division of Binance, highlighting that he merely sits on the Binance.US board and isn’t heavily involved in the decision making process. 

The prospective listing of Binance.US represents the latest step that the cryptocurrency industry is taking towards more mainstream acceptance. Although the company is likely to have ambitions to perform better in its first year than how Coinbase fared, by following in its rival’s footsteps, we can see a growing trend of cryptocurrency firms flocking to Wall Street. 

If Zhao’s prediction that crypto and traditional stocks may eventually merge, the move will be down to companies like Binance pulling cryptocurrency into the mainstream. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Dmytro Spilka

Dmytro is a finance writer based in London. His work has been published in The Financial Express, The Diplomat, IBM, Investing.com, FXEmpire, Investment Week and FXStreet.

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