It’s no secret that many private, venture-backed companies that raised capital during the previous bull market have overinflated valuations that could soon see a significant correction. One area we’re beginning to see this in is crypto-related companies. The collapse of FTX, a major crypto exchange, and the potential repercussions this will have throughout the crypto industry will likely put downward pressure on valuations. However, the lack of transparent data could delay the effects on private company valuations.
Let’s take a look at CoinList, a Prime Unicorn Index component that could see these effects, and the opportunities these types of situations can create for investors. CoinList is a launchpad, a platform where new projects can raise funds from the public, and a crypto exchange founded in 2017 at the heart of the “ICO Boom.” This period saw a flood of projects launch unregulated ICOs, or Initial Coin Offerings, most of which failed. In addition to its exchange and launchpad, CoinList also offers a demo day service for projects to connect with investors and has made seven venture investments. In April 2022, it acquired cloud security provider Altitude Networks and launched CoinList Digital Asset Services. CoinList was listed as a creditor during the Three Arrows Capital bankruptcy earlier this year.
According to Prime Unicorn Index, CoinList has a valuation of $1.3B, raising $104.78M over three rounds. Notable investors include Fenbushi Capital, DCG, Accomplice VC, Blockchain Capital, Maven, Hashkey, Jack Dorsey, and others. CoinList raised $16.03M in its seed round on 6/8/20, $50M in its Series A1 on 7/28/21, and $38.75M in its Series A2 on 10/1/21.
As of 12/7/22, its exchange had $211,878 of 24H volume and 47 listed tokens. For comparison, Binance and Coinbase had over $11.28B and $1.27B in the same period, respectively. In addition, the exchange has had numerous instances of halted or delayed withdrawals recently, and it has yet to add audited proof-of-reserves, a measure showing assets held by the exchange and becoming best practice in the industry. Following the FTX collapse, users have been shifting towards moving assets off exchanges and into hardware wallets, such as a Ledger, or browser wallets, such as MetaMask. Most users that still wish to utilize a centralized exchange have shifted to more reputable and regulated exchanges, such as Coinbase or Kraken. This will likely further damage CoinList’s exchange.
CoinList’s website shows 29 tokens facilitated by its launchpad, the majority of which are now trading at a lower price than at launch. Since the launch of this service, sentiment towards ICOs and related offerings has changed. Given the current market conditions, most investors tend to avoid these smaller, illiquid tokens, meaning it will be hard for any token launch to perform well in the near future. In addition, CoinList has not made recent announcements regarding upcoming offerings. The market is flooded with launchpad services, with many smaller exchanges offering similar products with more potential investors. Research shows there are at least 26 launchpads, showing the abundance of competitors in this space.
Although having significant funding from a noteworthy list of investors, it may be difficult for CoinList to maintain a >$1B valuation, especially given the current state of the crypto market. Unfortunately, CoinList is not the only crypto company in this position. This poses a significant risk to investors that may be overexposed to these assets. One solution to this issue is the Prime Unicorn Index, which measures the share price performance of private venture-backed US companies worth $1B or more and recently partnered with a bulge bracket bank to issue Bull/Bear notes tied to the Index. Using these notes, investors can go long or short to either hedge their position or gain exposure to this asset class. Please do not hesitate to contact me at will@primeunicornindex.com for more information!