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3 Charts That Show Me Coinbase Is Set Up for a Big Year Ahead

By Taylor Carmichael – Updated Jan 4, 2022 at 3:51PM

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Coinbase is the dominant franchise in the altcoin space. When the market realizes that crypto is a lot bigger than Bitcoin, this stock will zoom higher.

Coinbase (COIN) is a top dog and first mover in the crypto space. It's a platform that allows people to invest in over 100 cryptocurrencies. While Bitcoin (CRYPTO: BTC) is the most famous coin offered on Coinbase, the real action is found in the non-Bitcoin crypto available on the site. That's where you will find 12,000% returns.

These non-Bitcoin cryptocurrencies are referred to as altcoins. I believe this altcoin universe will one day dwarf Bitcoin in importance (and valuation). So that's why investors are flocking to Coinbase, in my opinion. They are looking for under-the-radar coins that will shoot to the moon.

First we'll look at charts for Solana (SOL) and Avalanche (AVAX), two altcoins on the Coinbase platform that have skyrocketed this year. And then we'll see a dramatic mismatch, when we look at Coinbase's stock chart. So let's start with one of the big winners on Coinbase's platform. 

Businessman flies through a cyber-sky with digital numbers trailing him.

image source: Getty Images.

Solana up 12,000%

Solana (SOL) has had an amazing run in 2021. The coin has increased in value almost 13,000% since the beginning of the year. If you had invested $10,000 in Solana back in January, you're now a millionaire.

Solana Price Chart

Solana Price data by YCharts

Avalanche up 3,800%

Avalanche (AVAX) is another coin trading on Coinbase that has skyrocketed. While Solana's rise is even more astonishing, a 39-bagger in a year is nothing to sneeze at.

Avalanche Price Chart

Avalanche Price data by YCharts

Why are these coins shooting to the moon?

These astonishing returns happened because the crypto space is still expanding, and new use cases are expanding with it. Solana and Avalanche have transaction speeds that are dramatically faster than earlier blockchains like Bitcoin or Ethereum (CRYPTO: ETH).

Coin Market Cap Transactions Per Second
Bitcoin $962 billion 7
Ethereum $490 billion 15
Solana $59 billion 50,000
Avalanche $29 billion 4,500

Data source: CoinMarketCap, Phemex, Avalanche website, Gemini, Coinbase

These fast transaction speeds are necessary for a lot of decentralized apps (dApps) that run on these peer-to-peer networks. So while Bitcoin is very secure (it's never been hacked), few dApps have been built on its blockchain. Instead, early adapters built out apps on Ethereum, which is twice as fast as Bitcoin. But Ethereum is still slow as molasses. And so the "gas price" (the fee to have your transaction validated on the blockchain) sometimes costs as much as $100. A transaction on Solana costs far less than a penny.

The rapid rise of Solana and Avalanche suggests the crypto landscape is shifting dramatically. We still don't know who the ultimate winners will be. That's why investors are flocking to Coinbase -- to find those winners.

Coinbase is smacking it out of the park

As you might imagine, Coinbase has some amazing numbers right now. The company sports a $70 billion market cap. And yet it's still growing by leaps and bounds. Sales were up 316% in the most recent quarter, and the company has an insane profit margin: 50%. 

Yet the stock is quite cheap. Its price-to-earnings ratio is 21. And it's trading at nine times sales. That's cheaper than Charles Schwab!

Stock Revenue Revenue Growth Profit Margin P/E
Coinbase $6 billion 316% 50% 21
Charles Schwab $18 billion 87% 30% 30

Data source: Yahoo Finance

While I'm bullish on Schwab, Coinbase is a stronger buy right now. I expect the crypto market overall to surge higher over the next decade (with a lot of volatility along the way). And Coinbase has a powerful moat that your average stock brokerage does not have. 

Cryptocurrency is not just a new coin that you can buy or sell -- it represents a new technology in peer-to-peer networking. While stock brokers are arguably commoditized -- any bank can do it -- trading crypto requires a lot of time, effort, and knowledge. Coinbase has been doing this for almost a decade and you can only buy 140 coins on the platform.

This is why Coinbase has been able to charge a fee for its transactions. What it does is difficult, and it's helping consumers while making the whole process easier. Coinbase is adding value. And the company has a lot of optionality, from decentralized finance applications to selling non-fungible token art.

Coinbase stock is undervalued by the market

Coinbase had its direct listing on April 14, after the crypto markets had already spiked way higher. You can tell from the Coinbase chart that the stock market right now sees "crypto," "Bitcoin," and "Coinbase" as basically synonymous.

COIN Chart

COIN data by YCharts

Coinbase stock is down 23% since it came public, and Bitcoin is down 24% in the same time frame. The two charts seem fairly synched. And there's a way that makes sense. In the Q2 conference call, Coinbase CEO Brian Armstrong noted that Bitcoin and Ethereum make up about half of the company's trading volume.

If you think about it, though, the investors who open accounts at the Coinbase site are obviously interested in altcoins. After all, you don't need a Coinbase account to buy Bitcoin; that coin is ubiquitous and is available in many places, including Block (NYSE: SQ)PayPal (NASDAQ: PYPL), or Robinhood (NASDAQ: HOOD). It will probably be available on Schwab, sooner or later.

Into 2022 and beyond

I'm bullish on crypto in 2022, and I think the Coinbase and Bitcoin charts will swing higher next year. But I also think that the crypto universe is far bigger (and more interesting) than just Bitcoin. I suspect there are many coins that will outperform Bitcoin in the years ahead -- and you will find those coins on Coinbase. I expect this top dog to add more and more coins to its roster, and provide its happy customers with more opportunities to explore the crypto space in the years ahead. And so Coinbase shares ought to trounce the market over the next decade.   


Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Taylor Carmichael owns Block, Inc., Charles Schwab, Coinbase Global, Inc., PayPal Holdings, and Solana. The Motley Fool owns and recommends Bitcoin, Block, Inc., Coinbase Global, Inc., Ethereum, and PayPal Holdings. The Motley Fool recommends Charles Schwab and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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