After its initial public offering in April of 2021, shares of the top U.S. cryptocurrency brokerage and exchange operator, Coinbase Global (COIN 2.01%), have been on a roller-coaster ride. In the first month and a half of trading, the stock dropped more than 30% before rising more than 50% over the next nearly six months. And since November of last year, shares have tanked, and the company now carries a market cap of under $20 billion. 

The tables have turned recently. Coinbase's stock, up 60% in the past month (as of August 17), is unsurprisingly getting a lot of attention lately. Is now the time to buy shares? 

Coinbase is an unpredictable business 

Even though Coinbase's stock is up recently, prospective investors must deal with the fact that the business and its shares are extremely volatile. This is obvious when you consider that revenues are largely tied to crypto trading volume, which is unpredictable quarter to quarter and depends entirely on the performance of the overall digital asset market. 

In its second-quarter earnings release, covering a three-month period that saw the crypto market fall from just over $2 billion to $900 million, Coinbase generated $655.2 million in transaction revenue, a 66.1% drop from the prior-year period. Retail trading volume accounted for only 21.2% of total volume, but because fees are much higher for individuals, this group represented 94% of all transaction revenue. 

In Q2 of 2021, Coinbase produced $1.6 billion in profit on slightly more than $2 billion of net revenue, for an incredible 79% margin. As you can see, things can be amazing one quarter and completely dark the next. This near-term uncertainty is the nature of Coinbase's, or any other crypto exchange's, operations. 

In the current crypto market drawdown, which has been going on since late last year, a lot of the negative price action can be traced to soaring inflation and the interest rate hikes the Federal Reserve has implemented to stop it. The result is that investors just aren't as comfortable owning riskier assets as they were last year, leading to depressed interest in Coinbase. 

To make matters even worse, Coinbase reported that the $96 billion of assets on its platform as of June 30 represent a 9.9% market share of the total cryptocurrency market. At first glance, this seems respectable, but that figure is down from an 11.2% share just three months prior. Evidently, Coinbase is losing assets to competing services. 

Nonetheless, it's difficult to argue the company's importance in the crypto space. Coinbase still possesses a powerful brand, offers ridiculously easy-to-use products, and is known for its top-flight security, extremely valuable characteristics in this nascent and unproven asset class. 

Coinbase is building the crypto economy 

Fortunately, management isn't oblivious to the company's reliance on trading volume, as it has worked to expand subscription and services revenue, which includes things like blockchain rewards and custodial fees. This segment posted sales of $147.4 million in Q2, up 43.7% year over year. Cryptocurrencies have been characterized by pure financial speculation up to this point, but with the hope of greater utility in the future, subscription and services revenue at Coinbase is set to grow. 

The business wants to help advance the cryptocurrency industry in three phases. Its main objective was to make crypto an investment vehicle. Looking ahead, however, Coinbase wants to advance crypto as a new financial system, primarily with staking and decentralized finance protocols. Lastly, and most importantly, Coinbase is trying to become the go-to application platform, akin to the Apple App Store, for individuals and institutions looking to access the crypto world and all it has to offer. 

In order for crypto to reach mass adoption, the complexities of the underlying technology need to be abstracted away so people don't even know they're using cryptocurrencies. A simple and easy-to-use interface will be necessary if 1 billion people are to use web3 products and services daily. That level of adoption would certainly create a true crypto economy, but it will no doubt be a bumpy ride to get there. 

Even after its 60% price rise in the last month, Coinbase stock still sells for a cheap price-to-earnings ratio of just over five, the lowest valuation multiple it has carried since the company went public in April 2021. For those who have a truly long-term mindset and believe in crypto's long-term potential, Coinbase could be a solid investment right now.