In 2023, Virtual currency market value It jumped from about $800 billion at the beginning of the year to more than $1.6 trillion by the end of the year. After a terrible 2022, investors appear to be much more optimistic about digital assets.
coinbase global (coin 3.46%) I rode this wave of enthusiasm to new heights.of virtual currency stocks In 2023, it will jump 391%; Nasdaq Composite Indexalthough it has fallen 26% this year (as of January 22nd).
But is Coinbase a great crypto stock that investors should consider buying right now? Let's take a closer look.
dominant trading platform
Even through all the turmoil in the crypto industry over the past few years, Coinbase has remained a steady presence. This resilience is a credit to founder and CEO Brian Armstrong. Unlike many other crypto companies, he has made it a priority from the beginning to work with legislators within the regulatory framework.
As a result, Coinbase was able to not only weather the industry turmoil, but also become a leading trading platform. According to theblock.co, Coinbase had a trading volume of $70 billion in December. This puts it in fourth place in the world.
Of course, the focus on providing a great user experience has made Coinbase a top cryptocurrency brokerage and exchange operator among both individuals and institutions.11 Recent Spot Approvals Bitcoin Exchange Traded Fund (ETF) (ETF) proves this. The majority of asset managers that have launched this product use his Coinbase as a custodian (more on this below), demonstrating its position in the industry as a trusted partner.
Drive recurring revenue growth
Armstrong and his team believe that in order to make Coinbase a viable business, its operations will not depend on volatile trading volumes and the fees they bring, but rather on stable, recurring revenue streams. I've known for a long time that I needed to. As such, there has been a great deal of focus on enhancing Coinbase's subscription and service offerings. This should also make it easier to manage the business, as management will have a better view of the company's future revenue streams.
Among subscriptions and services, one of the ways Coinbase makes money is through its custody solutions. This is where the approval of the Spot Bitcoin ETF could be a major sales driver going forward. And the possibility is Ethereum Spot ETF Once you bring it to market, the financial benefits are even greater.
In the most recent quarter, subscription and services revenue increased 59% year-over-year and accounted for 52% of the company's overall revenue. These are exactly the trends that business owners want to see. And that is something shareholders should be encouraged to do as well.
High risk, high return
After the company's stock's incredible performance in 2023, along with a renewed sense of optimism surrounding the crypto industry, it's now much easier for investors to view Coinbase stock as an easy investment. However, I think you should temper your expectations a little.
Coinbase should be considered a high-risk, high-return stock. This risk arises from the fact that the cryptocurrency market is still in a relatively early stage and there is a lot of uncertainty about what it will look like in 5 to 10 years. I don't think Coinbase will do well at all if cryptocurrencies fail to gain mainstream adoption, with fewer real-world use cases and painful regulatory burdens than many expect. In fact, in this scenario, the company may eventually cease to exist.
On the other hand, investors who are bullish on the future of the cryptocurrency industry may find no better way to gain solid exposure to this asset class. Coinbase can essentially be viewed as a bet on the growth of the overall market. But again, it all depends on your risk tolerance and confidence in cryptocurrencies.
Neil Patel and his client I have a position in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
