📈 Whoa, Coinbase

Coinbase makes one heck of an entrance | Goldman's best-ever results |

Hi Reader, here's what you need to know for April 15th in 3:07 minutes.

👋 Come find the official Finimize Club on Clubhouse, ladies and gents. We’ll get started at 6pm UK time / 1pm New York time, and be chatting all about Coinbase’s history-making stock market listing. Join the club

Today's big stories

  1. Investors gave Coinbase a very warm welcome when it listed on the stock market
  2. Stock market volatility is all set to kick off again, and there are three simple ways you can profit when it does – Read Now
  3. Goldman Sachs reported its best-ever quarterly results, and the investment bank has Reddit traders to thank

New Money

New Money

What’s Going On Here?

Coinbase – the world’s second-biggest crypto exchange – hit the US stock market for the first time on Wednesday, and investors were more than happy to usher in this new era of finance (tweet this).

What Does This Mean?

Coinbase has been credited with bringing cryptocurrencies into the mainstream, and now that they’re more popular than ever, it might’ve figured its shares would be in high demand too. That paved the way for a “direct listing” – in which investors rather than investment banks set the share price – and the biggest stock market debut of any crypto firm so far.

Coinbase read the room right: investors initially priced its shares at $380, which is well ahead of the $250 “reference price” it went in with. That price puts the company’s value at around $100 billion – a neat step up from the $8 billion it hit in 2018.

Why Should I Care?

For markets: Where bitcoin goes, Coinbase goes. 
Coinbase makes almost all its revenue from trading fees – and since the bulk of those trades are in bitcoin, Coinbase’s fortunes are closely linked to those of the OG cryptocurrency. But the reverse is also true: bitcoin’s price hit an all-time high on Wednesday after Coinbase’s stock market listing proved that – love it or hate it – crypto's in the big leagues now.

Zooming out: There’s a lot of competition out there.
Coinbase reckons investors were using its platform to hold 11% of all cryptocurrency assets by the end of last year, but it’ll have to work hard to defend that market share from its rivals. And we’re not just talking crypto exchanges like industry-leader Binance either: fee-free trading app Robinhood announced last month that it’s working on its own cryptocurrency wallet, which might make Coinbase – whose high fees give it huge profit margins – break out in a cold sweat.

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2. Analyst Take

Stocks Are Quiet. Too Quiet.

What’s Going On Here?

Sure, a key measure of US stock market volatility – which tracks how vigorously prices are moving up and down – just dropped to its lowest level in a year.

But don’t be fooled: this stock market calm is almost bound to come to an end sooner rather than later.

The US economic recovery, after all, still looks fragile, and the path out of the current health crisis is unlikely to be free from new setbacks. And that could rattle markets.

One anonymous institutional investor even made a major bet on exactly that eventuality just last week – and if you agree, you can too.

That’s today’s Insight: three ways to set yourself up to profit when volatility comes surging back.

Read or listen to the Insight here

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Goldman Stonks

Goldman Stonks

What’s Going On Here?

Goldman Sachs had Reddit traders to thank for its best-ever quarterly results on Wednesday, so it mightn’t be long before the investment bank is posting its earnings entirely in gif.

What Does This Mean?

Goldman’s earnings didn’t just blow past expectations: they rocketed almost 500% versus a year earlier. That was down to a couple of things. First, the bank’s trading business, which had its best quarter in over a decade as Redditors pushed the sheer number of market trades to record highs. And second, the bank’s underwriting business, which makes money by helping companies “go public” through initial public offerings – a market that was red hot among tech firms and special-purpose acquisition companies (SPACs) last quarter. That segment saw its revenue quadruple from the same time the year before – hitting its own record high.

Why Should I Care?

For markets: Big banks are starting to feel more relaxed.
Both JPMorgan and Wells Fargo reported expectation-beating results on Wednesday too, and they had a little something extra working in their favor. Both firms’ earnings took a knock last year when they set aside cash in case pandemic-hit borrowers couldn’t repay their loans, but now that the US economy is starting to rebound, they felt confident enough to reverse some of those provisions last quarter. That added a tidy $1 billion and $5 billion to Wells Fargo’s and JPMorgan’s quarterly earnings respectively.

Zooming in: Goldman’s following the money.
Of the six biggest US banks, Goldman makes the biggest share of revenue from investment banking activities like trading and underwriting. That came in handy last quarter, sure, but it’s actually been holding the company back. Firms with big retail banking businesses, after all, have benefited from access to cheap money through customer deposits for the last decade – money they could then lend or invest to generate juicy profits. No wonder, then, that Goldman's working so hard to expand its own recently launched retail banking business.

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