Things might just be starting for Coinbase, presenting a valuable opportunity for investors.
Hindsight is always 20/20. It is only after the years pass that we realize there was a clear moneymaking opportunity right before our eyes.
Fortunately, for those looking to seize the moment and invest in one of the most transformative companies on the market, we needn’t look any further for this opportunity. Here are three reasons I’m buying Coinbase Global (COIN -1.27%) stock like there’s no tomorrow, knowing that my future self will be thanking me, and hopefully yours, too.
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1. The ideal proxy for crypto’s growth
The primary reason to consider investing in Coinbase is straightforward: Its crypto-centric business model positions it to grow alongside the expanding cryptocurrency market.
Despite the significant strides crypto has made, it is still in its infancy. Currently, there are an estimated 500 million crypto users globally, a number reminiscent of internet users in 2001. From this perspective, Coinbase is positioned similarly to the early-stage internet companies that have since become some of the most influential corporations in the world.
In terms of being in an industry with high growth potential, Coinbase checks all the boxes. Yet the most compelling indicator of crypto’s potential and Coinbase’s future success is the increasing involvement of institutional investors.
During the past decade and a half, crypto’s rise was primarily fueled by retail investors like you and me. But that’s starting to change. Thanks to the approval of spot Bitcoin exchange-traded funds (ETFs) and the coming approval of spot Ethereum ETFs, institutional investors now have easy access to crypto through the stock market.
This growing acceptance among established financial institutions suggests that cryptocurrencies are becoming an integral part of the global financial ecosystem, and that crypto isn’t going anywhere anytime soon.
Best of all, Coinbase isn’t just capitalizing on this shift; it is in a good position to facilitate it. The platform offers a user-friendly interface for retail investors, fostering grassroots adoption of crypto worldwide. Simultaneously, it provides sophisticated products and services tailored for institutional investors looking to explore the power of digital assets.
As both retail and institutional investors become more comfortable with crypto, Coinbase stands to benefit immensely, further solidifying its long-term market position.
2. A resilient and diversified business model
Coinbase isn’t a newcomer to the crypto scene. With more than a decade of experience, the company has evolved alongside the crypto market, continuously adapting and expanding its business model to remain relevant and profitable. Today, Coinbase’s business is arguably more resilient, diversified, and productive than ever.
Just three years ago, Coinbase derived more than 90% of its revenue from transaction fees, a reliance that posed a significant risk and was the primary reason for its $1 billion loss in the second quarter of 2022. However, the company has made substantial strides in diversifying its revenue sources. Now, transaction fees account for just 60% of its profits, thanks to the successful launch and growth of several new products and services.
These new revenue streams include custodial services, which provide secure storage for large amounts of cryptocurrency, and stablecoin interest, letting users earn interest on their stablecoin holdings. And Coinbase offers staking rewards, enabling users to earn returns by participating in the validation process of certain cryptocurrencies.
The company has also expanded with the launch of an international perpetual exchange and its own blockchain, Base, further enhancing its product portfolio.
Coinbase has come a long way from its inception as a simple Bitcoin trading platform. Today, it has a robust and diversified revenue model poised to generate long-term value. This evolution not only demonstrates Coinbase’s ability to adapt but also highlights its knack for innovation and its role in promoting crypto adoption.
As the market continues to grow, Coinbase’s diversified approach positions it well to capitalize on future opportunities.
3. Regulatory clarity is looming
The third and final reason I am buying Coinbase stock is because of the evolving regulatory landscape. Presently, the crypto industry operates in what could be compared to a no-man’s-land. However, that is quickly changing.
Not only has it become a focal point of discussion in the political arena, but there is also growing support among legislators to aid the growth of this asset class. Some policymakers have even argued that owning crypto is a constitutional right, considering it a form of personal property.
The pace of regulatory progress might raise concerns, but progress is being made nonetheless. The growing legislative support will not only propel the crypto industry forward but will also directly benefit Coinbase.
First, it will grant the company greater freedom and confidence in its operations. Currently, Coinbase moves cautiously, potentially shelving certain innovative ideas due to concerns over legal repercussions. Clear and supportive regulations would ease these uncertainties, enabling the company to pursue new opportunities with increased assertiveness.
Second, regulatory clarity will address a significant concern that has deterred many potential investors. The lack of definitive guidelines has left numerous investors, both retail and institutional, hesitant to enter the crypto market. As regulators provide clearer directives and support, it will lower barriers to entry, encouraging a broader range of investors to participate.
This influx of new investors will stimulate demand for crypto assets and provide an opportunity for Coinbase to solidify itself as the premier platform for buying, selling, and managing cryptocurrencies.