In this video I will be talking about why now is the perfect time to buy Coinbase (COIN 7.10%) despite the recent crypto crash. Since its IPO, Coinbase is down 30% and is now valued at $46 billion, and based on recent earnings that would mean that the company trades at a P/E ratio of just 16. Which in this market is pretty cheap.
For starters, Coinbase has never been hacked. There's nothing more important in the asset world than security. Coinbase already has approximately 10% crypto market share based on its last earnings report. It had $223 billion in assets under management, which is very impressive considering there are thousands of exchanges out there. The custody part of Coinbase will be very important for its future. If big institutions start offering crypto assets and services to their clients, Coinbase would be the obvious choice.
Coinbase's fees are often criticized, and rightly so. They are unsustainable. But if you believe that blockchain is inevitable, then exchange volumes are going to go up significantly because of additional volumes stimulated by the market's adoption of new trading instruments. This should be enough to outpace the "damage" that fee reduction would have on the business. Keep in mind that Coinbase has been cutting fees for years while simultaneously increasing revenue.
During bull markets, Coinbase's business is booming. But during bear markets or crypto winters, not so much. We've seen Bitcoin (BTC 2.44%) go from $60,000 to $30,000 in a matter of weeks. That could change drastically if decentralized services, DeFi (decentralized finance), and other blockchain-based services become mainstream. New decentralized services could be tokenizing themselves on the blockchain instead of seeking access to traditional equity markets. This is a positive for Coinbase, as it means multibillion-dollar businesses will be trading on their exchanges rather than going to traditional markets.
This in turn will have a positive effect on the devastating crypto winter.
There are lots of crypto exchanges and services out there. But liquidity is Coinbase's moat, institutions get best-in-class fees, investors get best-in-class custody, and retail gets best-in-class usability. If a bank wants to offer crypto services, it will go to Coinbase.
In the future Coinbase will become a one-stop-shop for everything crypto. I like to call it the "NASDAQ of Crypto."
Do watch the video below for the full insights.
*Stock prices used were the closing prices of June 24, 2021. The video was published on June 25, 2021.