A smart way to play the crypto market
While most readers are already well aware of how the stock market can help build wealth for investors in the long run, cryptocurrencies have caught the attention of many in recent years. The burgeoning asset class has certainly fallen into disfavor in recent months, but the impressive return it gave before it can not be denied.
If you are new for cryptocurrenciesso you should seriously consider buying stocks in Coinbase Global (COIN 11.12%)the leading US broker and crypto exchange operator.
Tough tough times
With the entire market down in recent months, Coinbase has faced strong headwinds. Because the business generates 87% of its revenue from trading fees, the huge drop in valuations across the industry has reduced the volume of the company’s platform. And the management, led by founder and CEO Brian Armstrong, is preparing for a long period of macroeconomic weakness.
“We seem to be entering a recession after a 10+ year economic boom,” he said in a blog post. “A recession could lead to another crypto winter, and could last for a longer period.”
This pessimistic view is why Coinbase recently decided to cut 18% of the workforce. Managing expenses and maintaining operational flexibility is a top priority right now, especially as other crypto companies have failed or are on the verge of collapse.
The recent turmoil in the crypto sector may scare investors away from the still incipient and untested asset class. While some of top cryptocurrencies out thereas Bitcoin and Ethereum, has produced fantastic historical returns, investors must be able to handle the inevitable ups and downs. The current outlook is challenging, but that does not mean you should write off the industry outlook.
Focuses on crypto growth
Up to this point, cryptocurrencies have mainly been used as a tool for financial speculation. People see sky-high prices and want to participate in the action to earn quickly. And this is precisely the reason why Coinbase’s revenue mix has skewed against transaction fees. In the future, however, the company hopes to help build the crypto-economy where real utility dominates.
The next part of Coinbase’s strategy is to help create a new financial system. And then it wants to be the primary gateway for users to access the crypto economy as an application platform. Thinks about apple‘s App Store, but all services are crypto-native. It is a bold ambition, but this plan is important because with real use cases, cryptocurrencies should become less volatile and will have greater significance in people’s daily lives.
In the last quarter, Coinbase’s subscription and service revenues, which include things like blockchain rewards and custody fees, increased 169% year-over-year, faster than the company’s total sales growth. This is clearly a positive trend to keep an eye on. Promising features like Coinbase Cloud, an infrastructure tool for developers building blockchain-based projects; and Coinbase NFT, a marketplace for making, buying and selling non-fungible tokenscan provide new growth pillars.
Probably the most undervalued aspect of the business is Coinbase Ventures. Coinbase’s internal venture capital alarm has made over 250 different investments (as of December 31, 2021) since its founding in 2018. The management team has not only created one of the most well-known brands in the industry in Coinbase itself, but it also has financial ties to a number of other innovative crypto companies. .
I believe that an investment in Coinbase shares is essentially a game of growth in the entire cryptocurrency sector. In other words, as the digital asset market hopefully continues to increase in value over the next decade and beyond, Coinbase’s business should benefit from its many sources of revenue and through its ownership of future crypto companies. For beginners in the industry, the added bonus is that it is not necessary to find out which individual cryptocurrencies will increase in value.
Nevertheless, investors should practice extreme patience and expect a lot of volatility along the way.
