In the weeks leading up to its direct listing, it became increasingly apparent that Coinbase Global (NASDAQ: COIN) would rank as one of the highest-profile debuts of the year. The hype surrounding the cryptocurrency exchange was palpable, with individual investors flocking to be among the first to get their hands on shares.

Coinbase delivered on the hype. The company landed a $250 reference price from the Nasdaq exchange, tentatively valuing the company at roughly $65 billion. Strong demand in the hours leading up to its debut pushed its opening price to a whopping $381, 52% above its reference price and briefly pushing its market cap to roughly $112 billion. The stock ended its first day of trading at $327.87, up about 31%. Investors looking to buy at this level should exercise care.

Shiny gold Bitcoin with market graph background.

Image source: Getty Images.

Given its recent results, buying shares might seem like a no-brainer. Preliminary first-quarter revenue surged 844% to $1.8 billion, up from just $191 million in the prior-year quarter. That was also a threefold increase sequentially, while its net income in a range of $730 million to $800 million will climb roughly 2,300% at the midpoint of the range. 

It's the increasing popularity of Bitcoin (CRYPTO:BTC) that drove the spectacular results, but it's that very connection that should give investors pause. Bitcoin has been on a parabolic run over the past year, driven by strong demand. Back in late 2017, Bitcoin climbed to nearly $20,000 per share, but plummeted the following year, losing more than 80% of its value. 

What does this have to do with Coinbase? The cryptocurrency exchange makes the vast majority of its fortune on transaction fees, primarily from the sale of Bitcoin. If the popular cryptocurrency experiences a significant retracement, fair-weather investors could be scared out of the market, and the number of transactions could plummet -- taking the vast majority of Coinbase's revenue with it.

Given the historic volatility, invest accordingly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.