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In 2021, the world of cryptocurrencies was rosy.
The exchange named Coinbase went public in April with a valuation of $86 billion. It was the first major crypto company to go public. It was soon declared a financial giant on Wall Street and its market capitalization was larger than the stock exchange on which it was traded. Nasdaq’s market cap was his $26 billion, while ICE (NYSE’s parent company) was valued at his $67 billion.
It is against this backdrop that Circle, the issuer of USD Coin, the fifth largest cryptocurrency in the world and the second largest stablecoin in the world, has announced its own plans to go public. It was the opposite. It was valued at $4.5 billion and was expected to list on the New York Stock Exchange under the ticker CRCL by the end of the year.
Circle then began tackling market share through USD Coin from rival Tether, and the cryptocurrency’s price continued to soar. By February 2021, that valuation had doubled to $9 billion. And then everything changed.
Risky asset prices plummeted as interest rates rose in response to the inflation crisis and the world moved into tighter financial conditions. Cryptocurrencies have been hit hardest, completely devastating the market.
This derailed Circle’s plans to go public, eventually canceling plans in December.A good way to assess how bad the timing would have been if Circle had gone public is to look at the stock price of Coinbase (I wrote an in-depth article on Coinbase’s plight here).
Even after a 45% uptick in the new year, the market cap is still at $13 billion, down 85% from its IPO valuation of $86 billion. With this in mind, it’s not hard to see why the Circle chose to let the deal fall through.
1/ big @Circle news. This morning we announced the closing of the proposed deSPAC deal. We regret that we were not able to complete our SEC qualifications in time, but we remain focused on building a long-term public company. https://t.co/R0XYfCFD54
Jeremy Allaire (@jerallaire) December 5, 2022
The big loser in all of this is crypto. I’ve written a lot about what I believe to be the biggest problem of the last year. It’s a blow to the reputation of the industry as a whole.
Not only that, but the continued lack of transparency surrounding so many centralized companies in this space is also damaging. For too long, these companies have operated in an unregulated and freely ruled Old West world.
Binance is a good example.In the wake of that, we issued a proof of reserves report FTX Meltdownbut Mazar, the audit partner issuing the reserve, suddenly canceled the relationship and gave up providing such reports to all crypto companies.
This comes amid ongoing misunderstandings as to what the report represents. I mean, they were declared audited by many in the crypto industry, but they weren’t even close to that. There was no mention of debt, nor was it anywhere near enough detail to give investors any confidence.
Yes, but debt is harder. We are not in debt to anyone. you can ask around.
CZ Binance (@cz_binance) December 7, 2022
The downfall of so many centralized players, including Genesis, Celsius, Three Arrows Capital, Voyager Digital, BlockFi, and FTX, has dealt an immeasurable blow to the entire industry.
The increase in listed companies will help counteract the reputational damage cryptocurrencies have suffered. Just as Coinbase has done badly for investors, its presence in the stock market lends an air of legitimacy to an industry that desperately needs it.
Circle maintains its intention to go public in the future when the time is right. As the industry continues to fight for legitimacy on the big stage, the entire cryptocurrency industry should want that to be proven to be true.
