Nothing better epitomizes the zaniness ruling financial markets these days than the great expectations surrounding the Coinbase IPO slated for April 14. The euphoria over the first major cryptocurrency player to go public is of a piece with the damn-the-fundamentals craze that's spawned the [hotlink]Tesla[/hotlink] phenomenon and pushed U.S. equities to near-bubble territory. Wall Street analysts and Bitcoin-loving investors are forecasting that Coinbase could debut at a $100 billion valuation.

To justify that number, the math shows, Coinbase would need to mushroom into the biggest financial exchange in the world. "It's part of the overall frenzy creating bubbles everywhere," says David Trainer, an analyst at research firm New Constructs. "When you do the numbers, there's no way to make an argument for owning this stock with a straight face."

Trainer just released an excellent analysis of Coinbase's prospects. It shows how new competition will hammer today's fat margins and argues that the crypto market won't be nearly as gigantic as Coinbase anticipates—all told making for a franchise worth a fraction of what its fans will be paying on opening day.

The flush times won’t last

Coinbase turned strongly profitable last year, more than doubling revenues from $483 million to $1.14 billion and lifting operating profits from a $45 million deficit to $409 million. Its registration statement discloses that Coinbase generated 87% of those revenues from trading and selling Bitcoin, Ethereum, and almost 50 other coins for both retail and institutional customers. Surprisingly, money managers and corporations now account for over half of its trades, bolstering its pitch that crypto is going mainstream in a big way. Its 35% operating return on sales equaled the 2020 margin posted by Goldman Sachs’s Global Markets franchise in one of its best years ever.

But what's really ignited Coinbase fever is the astounding results for its March quarter, released on April 6. Its Q1 revenues soared 11-fold to $1.8 billion, 58% more than it collected in all of 2020, and operating income rose to over $1 billion, doubling the figure for last year. Its operating margin of around 55% far exceeds what the trading arms of the Wall Street banks pocketed in a banner 2020.

Read: Coinbase is going public without an IPO. Here’s how its direct listing will work

But here's the real head-spinner: Coinbase generated 0.46% on each dollar it traded in cryptocurrencies, or almost $300 for every Bitcoin it bought and sold for customers. It's the impossibility of maintaining anything like those superrich, virtually never-before-seen trading margins that underscores how Coinbase's likely valuation will be wildly out of whack with its actual prospects.

Enter the competition

In its S-1, Coinbase details that it charges customers a flat fee, reportedly around 0.5% on the dollar value of a Bitcoin or Ethereum trade. That charge can be lower or higher depending on the volumes—the more business a customer trades, the lower the percentage—or the regions where the client operates. It also collects much smaller amounts from the spread between the "ask" at which it buys for customers, and the "bid" at which it sells. How does the Q1 average fee of 0.46% compare with the figures for the two largest owners of securities exchanges in America, Intercontinental Exchange (ICE), and [hotlink]Nasdaq[/hotlink] Inc.?

In 2020, ICE and Nasdaq each made an average of 0.01% on each dollar of securities' trades. Hence, Coinbase reaped about 50 times the margins of those longstanding, gargantuan marketplaces. It generated the equivalent of three-quarters of Nasdaq's trading revenues—$1.5 billion versus $2.0 billion—on 2% of the volumes.

It can't last, says Trainer. He predicts that fees for trading cryptocurrencies will follow a similar downward trajectory as those in stocks, possibly all the way to zero. Coinbase's slice of each transaction is so big, and its profits so gigantic, that rivals can slash what they're charging and still mint huge profits. "Competitors such as Gemini, Bitstamp, Kraken, Binance, and others will likely lower or zero trading fees to take market share," he says. "If margins are that good, you invite competition." That will start a "race to the bottom" similar to the contest for market share that triggered the collapse, then virtual elimination, of stock commissions in 2019. Trainer also expects traditional brokerages to soon offer trading in cryptocurrencies, further pressuring Coinbase's rich fees.

How fast must Coinbase grow to be worth $100 billion?

Trainer ran the numbers. For Coinbase to reach $100 billion market cap by 2027, its revenues would need to jump 50% a year to $21.3 billion, while free cash flow keeps pace, waxing to $3.2 billion, more than 10 times the figure for last year. It would still be selling at a rich multiple of 30 times cash flow. At $20-billion-plus, Coinbase would exceed the combined 2020 revenues of ICE and Nasdaq by 50%.

Put simply, to reach the size worthy of a $100 billion market cap—and that's starting today—Coinbase would probably need to become the biggest exchange in the world. That's the bet investors are making if they buy its shares at the April 14 offering and beyond.

Can Coinbase get there?

For Trainer, grabbing the trophy looks like a mathematical impossibility. If Coinbase's operating margins decline to the average level of 23% for the 18 largest investment banks—still a big number—and its revenues grow at a strong 21%, the rate that Nasdaq achieved in its rapid growth phase, it will be worth $18.9 billion, or over 80% less than the $100 billion it could command next week.

Another distressing metric: Say Bitcoin's trading margin declines from 0.46% to 0.10%. That's still 10 times what ICE and Nasdaq are generating. To reach the $21.3 billion in revenue that rings the bell, by Fortune’s estimates, Coinbase would need to trade $17 trillion a year in Bitcoin and other tokens. That's four times the total volumes for all cryptocurrencies, on every exchange, for 2020.

For Coinbase CEO Brian Armstrong, a future in which such epic numbers are achieved looks anything but impossible. The S-1 states that "crypto has the potential to be as revolutionary and widely adopted as the Internet." He's selling a growth story for an investment that's still far from mainstream. For Trainer, Coinbase is the epitome of a "meme stock that's traded without regard for the fundamentals." The vision is compelling as long as it remains lofty and doesn't get too specific about the heroics needed to be worth $100 billion. Investors should keep in mind that they'll be paying a stratospheric price for backing a daring expedition that's unlikely to reach the mountaintop.

This story was originally featured on Fortune.com