From Coinbase to SpaceX: How the History of Crypto IPOs Forewarns of Risks for AI Giants Going Public?

Written by: Alexander S. Blume, CEO of Two Prime Digital Asset Investment Advisors

Translated by: AididiaoJP

As the IPOs of SpaceX, Anthropic, and OpenAI approach, many feel that AI stocks are set for a long-term bull market. However, as we have seen in other rapidly developing industries, these significant IPO events often mark pivotal market peaks. The case of Coinbase's IPO provides important insights.

Coinbase IPO: Lessons from the Market Top

On April 14, 2021, Coinbase completed its IPO through a direct listing, marking the official entry of the crypto industry into the mainstream. Notably, it opted for a direct listing rather than a traditional IPO mechanism, allowing insiders (mainly executives and VCs) to sell shares directly to the market with almost no restrictions.

At the time, market sentiment was extremely optimistic, with Bitcoin hitting new historical highs daily, and few believed the market was at its peak.

On the first day of trading, Coinbase's share price opened at $381, peaked at $429, and then dropped to $328. Insiders profited by selling shares worth billions, while most new investors incurred losses that day. On the same day, Bitcoin reached a historical high of around $65,000 and subsequently fell by about 76%, dropping to a low of $15,500. Coinbase's share price also declined by about 80%. Clearly, a large IPO does not guarantee that a bull market will continue.

SpaceX IPO Will Add $1.77 Trillion in Market Value

So, what should investors consider when evaluating AI stocks? Ultimately, asset price fluctuations depend on supply and demand. This includes momentum and excitement dynamics, but unlike Bitcoin, stocks also have earnings metrics to reflect corporate health.

The essence of an IPO is the addition of new shares to the market. This funding must come from somewhere—either new cash flow entering the public market or the transfer of funds from other stocks to participate in the new shares.

SpaceX is expected to go public this Friday (June 12), bringing $75 billion worth of new shares to the public market, which is only a small part of the company's total market value. However, this will add $1.77 trillion in market value to the entire market. Currently, SpaceX's latest private valuation is about $1.25 trillion. In a sense, this merely shifts market value from the private market to the public market, but now with real-time pricing. Furthermore, SpaceX's business also involves areas beyond AI, such as aerospace and communications. Investors in the AI sector need to assess how this capital flow might impact other stocks.

How Hyperliquid and Polymarket Price the SpaceX IPO

The crypto pre-IPO market and prediction markets (especially Hyperliquid and Polymarket) also provide us with insights into market expectations for SpaceX's share price.

Currently, the trading price for SpaceX perpetual futures on Hyperliquid is $167, which is $32 higher than the IPO price of $135, representing a premium of about 25%. Notably, this price has retreated from a high of $215 at the opening in mid-May.

Polymarket offers a probabilistic perspective: 47% of participants believe that SpaceX's market value on its first day of trading will settle above $2.2 trillion, corresponding to an approximate 25% gain on the first day.

Is the SpaceX IPO a Buy or a Bubble?

The biggest risk lies in an unsuccessful IPO that could burst the bubble for the entire industry. If signals of demand exhaustion emerge, it could affect other stocks, leading to position liquidations and a chain reaction of declines.

The market mechanism is also crucial. Coinbase's direct listing partially concealed the selling pressure from insiders on the first day. Once SpaceX goes public, it will quickly be included in multiple major indices, with 30% of shares reserved for retail investors, which could provide some support. SpaceX and Goldman Sachs have indicated that IPO demand has exceeded supply by at least twofold, but this is not uncommon and does not guarantee a positive performance in the first few days of trading. The genuine interest of retail investors and the market still needs to be observed, and any signs of weakness could trigger two-way volatility.

Stocks trading on momentum rather than fundamentals are more reflexive in their pricing—belief is built on technical indicators rather than the actual quality of the company. Once confidence wavers, people will quickly protect their positions and expect others to follow suit.

Economist Keynes is said to have remarked: "The market can remain irrational longer than you can remain solvent." Even if SpaceX's future earnings appear excessively high and AI and aerospace stocks are severely overbought, the momentum from these sectors, combined with Musk's personal charisma, may still dominate short-term trends. The world's top investment banks are fully backing this deal, while those looking to short SpaceX and Musk should proceed with caution.