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The Issuance of a $1.5B Junk Bond by Coinbase Indicates Investors are Eager to Join Crypto

Annie Li   Sep 15, 2021 08:45 2 Min Read


Coinbase's sale of a junk bond with a total value of $1.5 billion shows that cryptocurrencies have gradually become mainstream.

The total amount of $1.5 billion in bonds is expected to sell. However, Moody’s Investor Services, a world-renowned credit ratings institution set Coinbase Global Inc.’s debt issuer rating to non-investment grade or junk grade mainly due to the uncertain regulatory environment and future competition. 

Several analysts from Moody's Fadi Abdel Massih, Donald Robertson, and Ana Arsov wrote in a report on Tuesday:

"Coinbase’s financial profile suggests investment-grade credit strength, but for now the uncertain regulatory environment and fierce competition offset these strengths."

Coinbase sells two types of bonds, 7-year bonds due in 2028 at a coupon rate of 3.375% and 10-year bonds due in 2031 at an interest rate of 3.625%.

An industry research analyst from Bloomberg said Julie Chariell said that:

"The strong demand is clearly a big endorsement by debt investors."

This bond issuance is a favourable event for the entire cryptocurrency industry and Coinbase. This product allows investors to directly participate in the benefits of cryptocurrency without investing in cryptocurrency and earn interest from it.

Since the bonds are one grade lower than the investment grade, Coinbase did not get the lowest borrowing cost. Generally speaking, the average yield of similarly-rated bonds is about 2.86%, which is lower than the interest rate of more than 3% this time.

Coinbase is not the first U.S. marketer to issue cryptocurrency-related bonds. As early as June of this year, MicroStrategy Inc. announced that the company plans to offer $400 million of senior secured notes to qualified institutional buyers to raise more capital to make more Bitcoin purchases.

As reported by Blockchain.News yesterday, Nasdaq-listed cryptocurrency exchange Coinbase Global Inc has announced its plans to raise new capital by issuing $1.5 billion aggregate principal amount of its Senior Notes to potential investors.


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