Since the beginning of the year, the broader crypto market is up around 150%. While this is still far off from the euphoric highs of the previous bull market, there's a renewed sense of optimism that this crypto winter might just be starting to thaw.
Should this be the case, one company is positioned to become a prime beneficiary of a crypto resurgence and overall trends in adoption -- Coinbase Global (COIN 8.93%).
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A freezing crypto winter sets in
Since its landmark initial public offering (IPO) in 2021, Coinbase has utterly struggled. For a brief time, when crypto was at the bull market's peak, Coinbase's revenue reached nearly $2.5 billion and profits exceeded $1.6 billion. Shares at the time were trading well above $300.
Shortly thereafter, however, a brutal crypto bear market ensued, causing Coinbase's profits to sink by 168%. The company reported a net loss of more than $1 billion at the depths of the crypto winter, which caused shares to plummet by 90% at their lowest point.
Coinbase's revamped business model
The main reason this recent crypto winter hit Coinbase particularly hard was due to its reliance on transaction fees. When crypto prices plummeted and transaction volume dried up, so did Coinbase's profits. While things looked incredibly bleak in the depths of the bear market, it presented an opportunity for Coinbase to reevaluate its business model and sources of revenue.
Over the last 1 1/2 years, Coinbase has been busy developing various new products to lessen its dependence on transaction fees and help it generate revenue even in the worst market conditions. These products are broadly categorized as "subscriptions and services" and include stablecoin revenue, blockchain rewards, interest income, and custodial fees. All of these are now proving to be valuable investments.
At one point, transaction fees comprised nearly 90% of total revenue, while subscriptions and services constituted a measly 11.8%. But with the company's renewed effort to diversify income, subscriptions and services now make up more than half of the total revenue.
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Introducing a new business strategy
Not only has Coinbase revamped its revenue model, but it has also completely overhauled its entire business structure. The company implemented a series of cost-cutting measures that helped it reduce expenses to their lowest levels in more than two years.
Most importantly, Coinbase continues to innovate, develop, and expand its product offering. In August 2023, it released its very own blockchain called Base. In just three months, Base has become one of the most popular Layer 2 solutions, generating more than $5 million in revenue.
In addition, the company is prioritizing international expansion. Despite already dominating the U.S. market, Coinbase's Go Broad, Go Deep strategy implemented at the beginning of the year is unfolding perfectly. The company is now operational in more than 100 countries and seems to be adding more every month.
Other endeavors, such as the launch of its International Derivative Exchange, new products for institutional investors, and cloud solutions, exemplify Coinbase's agility, resilience, and ingenuity. Add it all up, and Coinbase is just $2 million away from turning a profit. It's an unreal accomplishment when considering that just over a year ago, it posted a loss of more than $1 billion.
The opportunity at hand
While shares are up more than 250% year to date (YTD), Coinbase's revitalization likely is only in its beginning stages. While crypto isn't quite in official bull market territory, all signs point to it heading that way. The company's current positioning is significantly better than it was just two years ago, so it will likely outperform previous revenue and income records.
As overall trends in crypto adoption continue to evolve and the likelihood of a crypto bull market increases, Coinbase is solidifying its position as the undisputed crypto champion. For investors seeking long-term, high-growth opportunities, Coinbase remains an excellent option.
