The company is already in Dizraptor’s portfolio since Apr 10. New offerings are possible in the future
About the Company
Kraken, a United States-based cryptocurrency exchange, provides access to trading between 100+ digital assets. Kraken is the fourth-largest crypto exchange by trading volume. It has nearly 9 million clients globally and was founded in 2011 in San Francisco, California.
For 2021, Kraken recorded a surge in business growth and the number of new users that signed up on the platform. In the first quarter of 2021, the number of new users jumped four times, compared to the second half of 2020. Spot trading volume in Q1 grew 1.5 times over spot trading volume recorded throughout 2020 to reach a record level of $160B. In comparison, trading volume on Coinbase was $335B in Q1 2021.
Company is expanding into the Middle East and will open its regional headquarters in Abu Dhabi and will become the first cryptocurrency exchange to offer direct funding and trading in UAE dirhams against bitcoin, ether and a range of other virtual assets. The firm got a regulatory approval and is expected to start operations during the second or third quarter. UAE launch marks a wider play into an increasingly lucrative Middle East region, which is considered as one of the fastest-growing cryptocurrency markets in the world, making up 7% of global trading volumes, according to Chainalysis.
Also in May 2022 Kraken has announced the future launch of an NFT marketplace.
In April 2021, the value of the cryptocurrency market topped $2T for the first time. In just over two months, the market capitalization of the cryptocurrency market has doubled. Bakkt Holdings, the digital-asset financial firm, estimates that the market of digital currencies will increase to $5.1T by 2025. There has been a rising interest in cryptocurrency adoption among corporate players. Several investment banks have set their price target for bitcoin. Guggenheim Investments predicts that it will reach $400,000 over a short period of time, while Citibank believes bitcoin should be worth $300,000.
The crypto market has been seeing rapid growth over the past year, encouraging exchanges to go public. In 2021 for the third year in a row, the crypto markets closed higher (+187%) in what remains a macro bull market trend. Though not as impressive as 2020’s return of +310%, it’s well ahead of 2019’s +58% return. Kraken’s major rival in the US Coinbase became public via direct listing on the 14th of April 2021. Jesse Powell, the CEO of Kraken, said that Kraken is “doing all the prep work” to become a public company in middle-late 2022.
Financials and Valuation
Kraken has raised a total of $137M from 28 investors, including Digital Currency Group (invested in Coinbase, Luno, Curv), Blockchain Capital (invested in Coinbase, Bitnet) and others.
The company can be compared with Coinbase, which debuted via direct listing on the Nasdaq stock exchange in April 2021. An initial market cap on the IPO comprised $85.8B and exceeded $100B after the listing. The IPO price per share was equal to $250 and on the first day of trading closed at $328.28. Its trading volume has amounted to $1580B in 2021. In comparison, the trading volume on Kraken in 2021 was $574B.
Kraken’s CEO Jesse Powell said that the company is in talks with investors regarding a new funding round. Noting that Kraken has a strong balance sheet, Powell added that the company is not in a rush to raise capital. А new round of financing could value the company at $20B. In the interview to Bloomberg TV at the beginning of March 2021, Powell said he would reject a $10B valuation, and suggested the company could raise double that – which appears to confirm Kraken is seeking the higher valuation. In June 2021, Jesse Powell said that the firm is “doing all the prep work” to become a public company in 12 to 18 months.
Sources of Kraken’s revenue are dependent on crypto assets and the broader crypto economy. Due to the highly volatile nature of the crypto economy and the prices of crypto assets, its operating results have, and will continue to, fluctuate significantly. The future development and growth of crypto are subject to a variety of factors that are difficult to predict and evaluate. If crypto doesn’t grow as expected, Kraken’s business, operating results, and financial condition could be adversely affected.
It is possible that Kraken will close a new funding round at a lower valuation than was anticipated earlier due to overall market volatility and the performance of Coinbase shares.
Kraken is subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or its failure to comply with, any laws and regulations could adversely affect its brand, reputation, business, operating results, and financial condition.
Binance, the world’s largest crypto exchange by trading volume, is among those also considering a bigger presence in the Middle East. It was given approval to operate in Abu Dhabi in recent weeks, and will recruit for over 100 positions in the country. Fellow exchange Bybit was also given approval to open a headquarters in Dubai last month, while FTX also received a virtual-asset license in Dubai and will set up a regional headquarters soon.
Self-proclaimed Satoshi Nakamoto sues Coinbase and Kraken over “fake” Bitcoin sales. According to an intellectual property claim he is alleging that Kraken and Coinbase are “misrepresenting” BTC as Bitcoin Core, when in fact it is a software implementation created in 2017 that is separate from the original system. It creates a reputational risk and additional unexpected costs for Kraken.
Kraken CEO Says Crypto Exchange Could Go Public in 12-18 Months, Bloomberg, June 2021
Bitcoin exchange Kraken considers going public after record trading volumes in the first quarter, CNBC, April 2021