Illustration: Rebecca Zisser/Axios

Cryptocurrency exchange Coinbase made big headlines yesterday, after a Recode report that it's closing in on a $500 million investment led by Tiger Global at an $8 billion valuation.

Why it matters: This means that Coinbase would effectively quintuple its valuation from a round just 14 months ago. It's a huge validation for the company and the broader digital token market. But, as Axios has also learned, Coinbase's valuation increase could have been even larger, but instead was negatively affected by the 2018 price deterioration of cryptocurrencies like bitcoin.

The backdrop: Talk of a new Coinbase funding began in the first half of 2018, with sources telling us that firms like Sequoia Capital expressed interest at an expected valuation in the $6 billion to $8 billion range. But Coinbase wasn't enthusiastic. Not so much because it didn't like the suitors, but because it had an offer from Vy Capital at a $12 billion valuation. There also may have been other superior term sheets.

  • At the same time, cryptocurrency prices were sagging. Bitcoin had experienced a massive drop between January and February, and never recovered. By the end of June, it was 67% off its highs the prior December.
  • "Their performance right now is pretty tightly correlated to the price of bitcoin," an early Coinbase investor explains.

Vy Capital then pulled the offer, leading Coinbase to entertain the price it had earlier rebuffed (this time with Tiger).

  • Sources says that the Tiger deal isn't finalized yet, but they expect it to be soon. The final close could occur later this month or in November.
  • Reps from Coinbase, Vy Capital and Sequoia Capital all either declined or didn't return requests for comment.

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