You normally wouldn't find out so early, but we might see a Kraken IPO as soon as 2022. This is great news for anyone still wanting to jump into cryptocurrency before it peaks.
You see, Kraken is a cryptocurrency exchange. When you invest in a cryptocurrency exchange, you're not just picking 1 of 1,000 cryptocurrencies and hoping it soars. You're investing in cryptocurrency in general as a medium of exchange.
Some early investors in Coinbase made returns as high as 6,567% after the Coinbase direct listing. Coinbase registered a whopping $63 billion market cap when shares started trading.
Kraken stock presents many of the same opportunities as Coinbase. While its projected market cap of $20 billion is only one-third of Coinbase's initial value, it represents massive growth for the company over just a handful of years - it was valued at just $5 million in 2014.
The majority of Kraken's growth has only just begun. Today, we'll show you how to play Kraken stock when it goes public.
Let's start with a few things you should know about Kraken.
What Is Kraken?
Like Coinbase, Kraken is an exchange on which you can trade cryptocurrencies. It was actually founded before Coinbase, in 2011, with the similar mission of normalizing cryptocurrency.
Kraken was founded by Jesse Powell with the goal of a safe, trustworthy exchange for crypto traders. The demand arose with various exchanges popping on and off the market, some even disappearing with millions of investor dollars.
With Kraken, people could safely and quickly invest in Bitcoin for the first time. Before it, there was Mt. Gox, which was hacked, and Kraken arose as the replacement.
Kraken has grown significantly with the cryptocurrency boom in the last few years. In fact, it has become one of the only crypto exchanges that is also legally considered a bank in the United States.
As recently as 2014, the company was valued at $5 million in its Series A funding round. Much of that went toward legal compliance and other in-the-weeds matters associated with crypto.
Two years later, the company did its Series B round, which apparently provided for acquisitions in the Dutch exchange CleverCoin and a crypto wallet software provider called Glidera, and after that, a trading platform called CryptoWatch.
The company was valued at just $4 billion in 2019. But Kraken predicts it will be valued at $20 billion come its public offering.
How Will Kraken Stock Go Public?
There was at first the question of whether Kraken would go public via SPAC, IPO, or direct listing.
You have examples of both SPACs and direct listings among these crypto platforms. A digital broker, eToro, recently went the SPAC route, while Coinbase opted for a direct listing.
Initially, blank-check companies were enticing for how they could take a private company to market faster without as much red tape. But SPACs have come under scrutiny by the U.S. Securities and Exchange commission recently, slowing down a SPAC investing craze that peaked at $170 billion for the year.
Additionally, Kraken said a SPAC deal at $10 billion valuation would be too low for the company. Judging by the company's $20 billion valuation target, it clearly believes public demand for Kraken shares will be much higher in 2022.
So, Kraken came out in preference of a later IPO. This might end up being a direct listing so as not to dilute Kraken's already existing shares.
It's rare you get to hear about a public offering so far in advance. But it's a great opportunity for you to prepare. As we approach the offering, potential investors will have plenty of time to learn about the company and make an informed decision.
Here's why you'll probably want to buy when the time is right.
Why Kraken Stock Is a Buy
Bitcoin's momentum is part of what could power demand for Kraken shares. Although the coin is in a big slump, down to $39,000 from a high above $60,000, Bitcoin is still up 288% in the last 12 months.
Corporations and institutional investors are still taking big positions in Bitcoin and other cryptos. Morgan Stanley (NYSE: MS) recently said it would offer its clients access to Bitcoin funds.
Another prime example, of course, is Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk. The company bought $1.5 billion Bitcoin in February.
Of course, cryptocurrency is also much more than Bitcoin. Elon Musk continues to move Dogecoin in and out of mania with his comments about the dog-themed digital currency. Other cryptos like Ethereum and Chainlink have followed Bitcoin to all-time highs this year.
In short, the crypto market is volatile. But it's getting significantly more exposure over time. And that's great revenue potential for Kraken.
Moreover, people want to get out of fiat currency amid dovish Federal Reserve activity of late. That's going to send more people to Kraken by next year for sure.
Another thing that makes Kraken attractive, along with easier crypto trading, is that 25% of the world's population that can't access a bank account can access Kraken if they have a phone or computer.
Now that crypto is transitioning from a novel, risky investment to somewhat normal, more crypto investors will flood in. If cryptocurrency ever fully displaces fiat, a platform like Kraken stands to dominate the space.
Ultimately, Kraken stock is a buy. Just think about this before you dive in right away...
How to Play the Kraken IPO
Judging from the Coinbase IPO, it might be hard to get Kraken shares at a reasonable price. The Coinbase IPO price was a whopping $250, showing just how far cryptocurrency has come in the eyes of the market.
Of course, while Kraken is one of the top cryptocurrency exchanges out there, it is significantly smaller and less known than Coinbase. That's not to say you should expect this IPO to get less hype, however. This one is just as likely to come rushing out of that gate.
For that reason, it might be wise to wait a while after the shares go public. The Coinbase price today is $229, so investors today get an 8.4% discount from the IPO price.
IPOs are already hugely influenced by market hype. You can expect that to be even more the case with cryptocurrencies. Cryptos like Dogecoin will go up or down by 100% on a daily basis depending on the number of times they're mentioned on Twitter.
So, whenever Kraken shares are made available, give the stock a few weeks to breathe. You will probably be able to get shares for a bit less than the debut price.
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