Coinbase Global (COIN -3.04%) recently reported some of the largest year-over-year gains anyone's ever seen in a company's first year as a publicly traded company. As has often been the case in 2022, the stock market wasn't impressed and actually pushed the stock down.
The cryptocurrency exchange generated 544% more top-line revenue in 2021 than in 2020 and it wasn't starting from a low point. Total revenue reached a whopping $7.4 billion last year.
The cryptocurrency exchange performed well in 2021, but Bitcoin has fallen around 17% since the beginning of 2022. In addition to sinking cryptocurrency prices, investors weren't pleased with the company's expectation of lower Despite the troubling volatility investors have a big reason to remain optimistic about Coinbase's future. Seven words from the company's CEO, Brian Armstrong, could mean billions down the road for Coinbase and its shareholders.
Not just traders anymore
Bitcoin's volatility is disturbing now but not necessarily a reason to avoid Coinbase. During the company's fourth-quarter earnings call, Armstrong outlined the number one reason to look past the temporary ups and downs and focus on the long term. He reminded everyone that "we've got major use cases now" and not just rampant speculation from fickle traders.
After watching goofy works of digital art sell for seven-figure sums, not rolling my eyes at the mere mention of non-fungible tokens (NFTs) is a challenge. Here's one reason I'm trying to keep the eyerolls in check. Last year, Coach handbags and Nike sneakers started coming with corresponding digital versions of some products. It won't happen in 2022, but it's just a matter of time before most consumers expect products they would display in the real world to come with NFTs they can display in the Metaverse.
Image source: Getty Images.
In addition to NFTs, the number of new financial services enabled by decentralized blockchain technology, or DeFi is exploding. Fintech companies are constantly finding new ways to automate the creation of new checking accounts, loans, and insurance policies. At the moment, nearly $200 billion in crypto assets is at work in a DeFi instrument.
If you want to participate in just about anything cryptocurrency related you need a wallet. There's already an endless array of different wallets with various functions but there's a good chance that the Coinbase wallet will be one of the most popular options for a long time to come. The company expects to spend at least $4.25 billion on technology and development this year and keeping customers tied to its wallet with increased functions and features is a top priority.
Coinbase's investments are bearing fruit at a mind-blowing pace. The number of unique wallets conducting at least one transaction per month climbed more than ten-fold over the past year to more than 900,000 in January.
Time to buy
You might be surprised to learn the stock market doesn't think Coinbase can continue growing at a fraction of the pace the company reported in 2021. At the moment, you can buy the stock at the shockingly low price of just 16 times trailing earnings.
Last year was a huge one for cryptocurrency trading that probably won't be matched again this year. Coinbase's bottom line will most likely contract in 2022, but long-term shareholders could be well rewarded. Within a few years, millions of people who don't know a blockchain from a hole in the ground could begin making regular transactions with a Coinbase wallet.
Coinbase's enormous resources don't guarantee that its wallet will hang on to a large share of a rapidly growing market, but its chances look pretty good.
