Investors didn't waste any time on Monday, continuing to push the stock market higher, building on gains from the past week. The Nasdaq Composite (^IXIC -0.70%) was the only index not to close at a record high, but it posted the biggest gains, while the S&P 500 (^GSPC -0.78%) and Dow Jones Industrial Average (^DJI -1.29%) managed to set new records even with more modest increases on Monday.


Percentage Change

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Data source: Yahoo! Finance.

Yet many investors are watching other parts of the market even more closely. In particular, cryptocurrencies have been doing extremely well lately, with Bitcoin (BTC -1.05%) leading the way higher and climbing into record territory above $60,000. That's been good news for a host of crypto stocks whose business models rely on a healthy cryptocurrency market, and the company that is seeing the biggest positive impact recently is Coinbase Global (COIN -6.37%). With the crypto exchange giant finally starting to see some more excitement return to the Bitcoin market, Coinbase has jumped to its best levels since right after its IPO, and many are hoping that it can continue to build on its recent gains. Below, we'll put Coinbase's gains into context and see whether it can keep up its momentum.

A rising tide lifts all ships

Interestingly, the latest surge for Coinbase came arguably from news that a competing method of owning cryptocurrencies was now available. Last week, a new exchange-traded fund gave investors a way to participate in the Bitcoin market. ProShares Bitcoin Strategy ETF (BITO -1.77%) focuses on Bitcoin futures contracts, choosing not to take direct custody of Bitcoin itself in favor of relying on derivative securities.

Yet Coinbase has been working hard to defend its business model and demonstrate its superiority. Last week, the company announced partnerships with Facebook (META 3.00%) and the National Basketball Association, with the goal of increasing visibility of crypto applications and supporting payments that use digital currencies.

Person looking at several screens, with world map in background.

Image source: Getty Images.

Perhaps most importantly, Coinbase stands to benefit whenever Bitcoin and other crypto tokens see greater adoption, because it offers ancillary services like institutional custody. For instance, on Monday, shares of Bakkt Holdings (BKKT -8.66%) more than tripled after Mastercard (MA -0.54%) announced that it would work with the digital asset platform, as well as payment tech specialist Fiserv (FI -0.17%) to make it easier to integrate fiat currency-based and digital asset-based payments. Again, even though Bakkt is arguably a direct competitor to Coinbase, investors seem quite happy with the progress that the crypto industry has made in persuading mainstream financial giants to move forward with cryptocurrency adoption.

Will Coinbase reach its full potential?

Even with the roughly $100-per-share gains that Coinbase has enjoyed since the beginning of October, the stock remains well below its highs. The stock came public in April and quickly jumped to nearly $430 per share before rapidly falling back. For quite a while, Coinbase traded below its initial reference price, reflecting some doubts about its core trading business.

In the near term, Coinbase will indeed have to demonstrate that its trading platform is viable and can generate sustainable fee income. Yet if the company can make a transition toward bringing in other types of revenue, it could go a long way toward demonstrating Coinbase's first-mover advantage in the space.

To succeed, Coinbase will have to keep innovating, and that could mean that the company will have to spend more on research and development in order to stay ahead. But in the long run, if the cryptocurrency market stays at the cutting edge of financial technology, then Coinbase has the opportunity to prove its leadership chops -- and that could send it back to its IPO-day levels in time.