With Declining Crypto Prices and Mounting Competition, What’s Next for Coinbase?

Cryptocurrency exchange Coinbase stock (NASDAQNDAQ
: COIN) has fallen nearly 27% in the past month after seeing a strong recovery through the month of July, though the stock is still down about 74% year-to-date. The latest sell-off comes as crypto prices have fallen again and the Federal Reserve indicates it will continue on its interest rate hike, despite a slight drop in inflation. Crypto bellwether bitcoin fell nearly 12% in the past month and is still down 55% year-to-date. Falling prices usually limit crypto trading activity on platforms like Coinbase. During Q2 2022, trading volumes on the company’s platform fell nearly 54% to $217 billion, while revenue fell 64% year-over-year to $808 million. Moreover, competition is also increasing just as the market is in a down cycle. While Coinbase has focused more on retail traders, who have moved to the sidelines through the crypto crash, rival offshore platforms have attracted more volumes from larger traders. For perspective, Coinbase’s market share fell to 6.3% in July 2022 from 10.7% in January, per data from CryptoCompare.

While it’s difficult to time an entry into Coinbase stock amid market volatility, there are some factors worth considering for potential investors. Things are likely to remain difficult for non-productive assets like crypto as the Fed continues its monetary tightening. However, cryptocurrencies such as bitcoin have shown resilience in the past, coming back stronger after major sell-offs. We may see this again when the crypto cycle turns (usually two to four years, according to Coinbase). As a company, Coinbase has shown the potential for extraordinary profits in good times. During 2021, the company’s total profits were $3.6 billion with revenues of around $7.4 billion. This could make the stock worth a look during the current decline.

Additionally, throughout the current crypto bear market, several smaller platforms such as Celsius and Voyager Digital have filed for bankruptcy, while suspending account withdrawals. This development could help more established and well-capitalized players like Coinbase win over more retail investors as things improve. There may also be some upside for Coinbase in the short term. EtherETH
eum – the second largest cryptocurrency by market capitalization – is likely to see a major network overhaul in the coming weeks. This is expected to open up additional commission-related revenue streams for the likes of Coinbase, which is one of the biggest players in the Ethereum trading space.

We value Coinbase stock at $120 per share, which is significantly above the current market price of $71 per share. See our analysis on Coin-based valuation: Expensive or cheap? for more information on Coinbase’s valuation. Also check out our analysis at Coinbase earnings: How does COIN make money? for details on the company’s main revenue streams and how they have developed.

What if you’re looking for a more balanced portfolio instead? Ours high quality portfolio and multi-strategy portfolio has consistently beaten the market since late 2016.

Invest with Trefis Market Beating Portfolios

See all Trefis Estimated price