The IPO fever whipping up animal spirits in the stock market has spilled over into the crypto-sphere. After watching investors pour millions into blank-check companies and seeing the likes of JFrog and Snowflake surge after market debuts, at least eight crypto firms are eyeing initial public offerings. Coinbase has filed. Other exchanges are laying out plans or looking to be acquired through special-acquisition vehicles. And two Bitcoin mining equipment firms in China are on IPO watch lists, according to Renaissance Capital.
While it’s somewhat surprising that an industry that prides itself on being an outsider to financial-market infrastructure has eyes for public listings, for some investors it is downright worrying. The IPO mania alone is enough to stoke bubble worries, but adding crypto to the mix after its record run is fueling concern that investors are setting themselves up for an especially painful comeuppance.
“Crypto is chronically frothy. IPOs are chronically frothy. We’re in the frothy phases for both right now,” said Aaron Brown, a crypto investor and Bloomberg Opinion writer. “So crypto IPOs this year? Frothy-squared.” The IPO market has been red-hot since last fall as companies rushed to take advantage of the 70% surge in stocks since the March lows. Public debuts and blank-check companies have grown so popular that record after record fell. And first-day pops in share prices, a barometer of investor appetite for newly public firms, are among the biggest in decades.
It has all become too much to ignore for the crypto industry.
Coinbase and eToro, as well as MicroBT, a mining company, have spurred chatter of public offerings slated for this year, according to Renaissance, which provides IPO ETFs and institutional pre-IPO research. A handful of others — Gemini Trust Co., a crypto exchange, and Bitmain Technologies and Bitfury, two firms centered around mining — may also join the wave of new entrants.
“It’s clear a gap has opened between private and public market’s valuation for tech companies, inciting startups to fast track a potential IPO,” said Emmanuel Goh, co-founder and chief executive officer of Skew, a data analytics and trade execution platform focused on cryptocurrency derivatives. “Given current appetite for cryptocurrencies, I expect extremely strong demand for bellwether crypto companies that are already turning a profit.”
Coinbase, which was valued at more than $8 billion in 2018, has ignited some of the biggest excitement. The company filed last month to go public in what many are arguing amounts to be a breakthrough moment for the industry. The exchange has about 35 million verified users and more than $25 billion in assets on its platform, Bloomberg reported. Coinbase declined to comment for this story.
Crypto enthusiasts have long sought a warmer embrace from Wall Street, wagering that greater mainstream acceptance could help usher in a period of growth. It’s a prognostication that was borne out in part last year, when institutional entrants helped push Bitcoin to new highs. “It’s a pure-play bet on the fastest growing industry in the world, crypto, and we’re in the loosest money regime in history,” said Nic Carter, co-founder of researcher Coin Metrics. Carter added that he expects others to follow Coinbase.
To Mati Greenspan, founder of Quantum Economics, it’s a good environment for crypto firms to consider public debuts. Institutional adoption means there are “deep pockets” that are willing to invest, especially while crypto prices are skyrocketing.