To The Moon

$Coinbase Global, Inc.(COIN)$

One of the bullish cases for Coinbase isn’t necessarily that it will become the dominant platform for cryptocurrency trading in the long run. In fact, focusing on trading may distract from the company’s more promising growth opportunities outside of exchanges. Coinbase is building critical blockchain infrastructure, similar to how AWS serves cloud computing or how Google's identity products function—but tailored for blockchain applications. Additionally, it has the potential to integrate financial services akin to a bank like JP Morgan.

With the new administration showing a more pro-crypto stance, there are exciting possibilities for blockchain innovation, including the potential to move stock trading onto the blockchain. This shift could revolutionize investing, not just for Coinbase shareholders but for the broader financial landscape. Tokenizing securities—turning traditional assets like stocks and bonds into blockchain-based tokens—could make financial markets more efficient, enabling faster transactions, increased transparency, and improved liquidity. If successful, Coinbase could play a leading role in this transformation.

Earning Overview

(COIN) reported strong financial results for the fourth quarter of 2024, surpassing analysts' expectations. The company achieved earnings of $4.68 per share, a significant increase from $1.04 in the same quarter the previous year. Revenue rose by 138% to $2.27 billion, exceeding forecasts of $1.84 billion.

The surge in revenue was driven by a substantial increase in transaction revenues, which reached $1.6 billion, up from $529 million in the prior year. Subscription and services revenue also grew by 71%, totaling $641 million.

Despite these strong financials, Coinbase's stock experienced an 8% decline following the earnings announcement. This drop occurred even as the company expressed optimism about the future of the cryptocurrency market, referring to this period as "the dawn of a new era for crypto." As of March 14, 2025, Coinbase's stock is trading at $177.49, reflecting a decrease of $14.32 (-7.47%) from the previous close.

Fundamental Analysis

Let’s start by examining some recent news, based on insights from Coinbase’s CFO. The newly formed SEC crypto task force may create opportunities for Coinbase to tokenize its stock (COIN) and other securities. This development, which emerged last week, has sparked speculation that tokenizing assets like stocks and bonds could soon become feasible.

Coinbase had initially explored this concept when going public but had to abandon the plan in 2021 due to regulatory hurdles, including the absence of U.S. exchange licenses for trading security tokens and the need for additional approvals.

So, what exactly does tokenizing securities mean? Coinbase explains that it involves converting ownership of an asset into digital tokens, which can then be divided into multiple parts—similar to shares of a stock. In theory, almost anything could be tokenized, from a baseball card to a YouTube channel to corporate bonds—even shares in Coinbase itself.

The potential impact of tokenization lies in its ability to enhance efficiency through blockchain technology. By leveraging blockchain, financial transactions could be faster, more transparent, and less reliant on traditional intermediaries. For example, instead of waiting days for a stock transaction to settle, blockchain technology could enable instant settlement.

Beyond public markets, tokenization could be particularly transformative for private markets. Raising funds for a new business, for instance, often involves lengthy settlement times and uncertainty regarding actual payment. Tokenization could facilitate immediate transactions, ensuring that once an investment agreement is made, funds are instantly transferred. It would also improve transparency around ownership and increase liquidity—making it easier to buy and sell private assets, a process that is currently expensive and complex.

Guidance

By leveraging blockchain technology, financial markets could be transformed, offering a more efficient and cost-effective way to raise capital and establish asset ownership. While stock trading is already nearly frictionless, inefficiencies still exist in areas like bond trading.

For example, individual investors rarely buy corporate bonds directly because of accessibility challenges and liquidity issues. Instead, they often invest through ETFs. Looking at a Coinbase corporate bond on Public.com, you can see the price fluctuations—from trading at 50-60 cents on the dollar in 2022 to nearly $100 today as yields declined. However, the bid-ask spread remains wide, highlighting the inefficiency and lack of transparency in the bond market.

If such assets were moved to the blockchain, liquidity could improve dramatically. Many bonds, especially illiquid ones, require institutional investors to go through a convoluted process involving prime brokers just to get pricing and execute trades. By shifting these transactions onto the blockchain, markets could become more efficient, transparent, and accessible to a broader range of investors.

This aligns with Coinbase’s long-term vision. CEO Brian Armstrong has frequently discussed updating the financial system through blockchain innovation. Tokenizing securities could provide a new revenue stream beyond traditional crypto trading, falling under Coinbase’s growing non-transaction revenue category. Unlike speculative crypto trading, which fluctuates with Bitcoin prices, securities tokenization represents a fundamental disruption with long-term potential.

Risks and Challenges

Regulatory clarity will be key. If the SEC and policymakers create frameworks that make it easier for companies to raise capital and for investors to trade or sell stakes—whether in public or private companies—Coinbase could play a crucial role as the intermediary facilitating these transactions. This could also drive significant growth on the Base blockchain, further diversifying Coinbase’s revenue model.

Regulatory Uncertainty: Despite recent legislative progress, such as the Senate Banking Committee's approval of a regulatory framework for stablecoins, concerns persist regarding consumer protections and financial stability.

Market Volatility: Coinbase's stock has experienced significant fluctuations, including a recent 10% drop following unmet investor expectations at the White House Crypto Summit and exclusion from the S&P 500 index due to high volatility.

Operational Challenges: The company has faced issues such as customer overcharges, compliance shortcomings leading to fines, and layoffs due to market downturns.

Valuation

(COIN) has experienced notable stock fluctuations recently. Since February 20, 2025, the stock has declined approximately 30%, coinciding with Bitcoin's drop from $98,000 to $79,000. Mizuho Securities adjusted Coinbase’s price target from $280 to $217, still about 16% above the current trading price of $177.49. Despite the downturn, average daily spot trading volume has risen to $5 billion, indicating potential revenue growth. Additionally, Coinbase's exclusion from the latest S&P 500 reshuffling and a lack of new supportive policies from the recent White House Crypto Summit have contributed to investor disappointment. This downturn contrasts with positive developments like the conclusion of a two-year SEC legal case and expansion plans.

Cathie Wood's Ark Invest capitalized on the market dip by acquiring 64,358 shares of Coinbase, valued at approximately $11.53 million, signaling confidence in the company's long-term prospects. Analysts view the recent Bitcoin price drop as a buying opportunity for crypto stocks like Coinbase, citing strong fundamentals and potential for recovery.

Market sentiment

Looking ahead to the first quarter of 2025, Coinbase projects subscription and services revenue between $685 million and $765 million. The company also expects transaction expenses to be in the mid-to-high teens as a percentage of net revenue.

Conclusion

While this transformation may not immediately impact Coinbase’s financials in the next couple of years, the long-term opportunity is massive. Over the next 5, 10, or 20 years, blockchain-based securities trading could reshape financial markets, making Coinbase a key player in this evolution. Investors should keep an eye on these developments, as they could redefine the company’s role in the financial ecosystem.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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