There's no exact recipe for a company to follow to a 10-fold gain in 10 years. But when one looks back at the businesses that have accomplished this feat, there are some recurring themes. Increasing a market cap 10X requires financial prowess and an embrace of pushing what's possible to new limits. Chances increase even more if that company is in an industry that's growing at an exponential rate.
There are likely a handful of these diamonds in the rough on the market today, but few present as clear an opportunity as crypto exchange Coinbase Global (COIN 5.68%). With its embrace of technological innovation, a resilient business model, and position at the forefront of crypto's financial revolution, forecasting a 10X gain in 10 years might be underselling its true potential.
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More users, more money
If Coinbase were to jump 10-fold from its current value, it would have a market cap of about $300 billion. When taking a look at its finances on a year-to-year basis, this doesn't seem like a promising outcome. Rapid swings between bull and bear markets in crypto can make Coinbase's earnings erratic. For example, Coinbase posted net income of $1.6 billion in Q4 2021 at the peak of the bull market, but followed that with a $1 billion quarterly net loss just over a year later after a brutal crypto winter set in. But when zooming out, a clear trend of growth comes into focus.
Five years ago, Coinbase's total annual revenue was about $500 million. Even at the depths of the recent bear market, Coinbase still reporter more revenue in one quarter than it did during all of 2019. Furthermore, while it has yet to release its final results for its full 2023 earnings, expectations are that revenue for the year will come in at more than $2.5 billion, a 400% increase from 2019.
Driving that revenue growth was Coinbase's ability to attract users. In Q4 2018, Coinbase reported just 850,000 monthly active users. Today, it has more than 6.7 million. In addition, the company has expanded from being primarily a platform for retail investors to being the preferred option for institutions interested in exploring crypto. Between Q4 2018 and Q3 2023, the total volume of quarterly institutional transactions increased from $5 billion to more than $65 billion.
Most importantly though, Coinbase has demonstrated financial discipline as its revenue has grown. Currently, its expenses are at the lowest level they've been since 2021 as new cost-cutting measures like an embrace of remote work and automation have been implemented.
A new Coinbase takes shape
For most of Coinbase's existence, it primarily operated as an exchange allowing users to buy and sell cryptocurrencies. But during the past year, it underwent a remarkable transformation, and now offers innovative products that continue to attract retail and institutional investors.
Made up of staking rewards, subscription plans, custodial services, stablecoin interest, and more, Coinbase's subscription and services segment now provides more than half of its total revenue. While transaction fees remain important for the company's health, its heavy reliance on them posed a serious threat to the company's viability.
Adding to Coinbase's ability to attract users is that it is expanding internationally. In an effort to grow outside the U.S., it implemented its "Go Broad, Go Deep" global strategy at the beginning of 2023, and so far, it has been a resounding success.
Coinbase now operates in more than 100 countries, offers its Coinbase One subscription plan in 38 countries, has launched an international derivatives exchange, and provides stablecoin and staking services in more than 110 countries. It also recently established its European headquarters in Ireland with plans to take advantage of the European Union's favorable crypto policies and solidify its presence in one of the largest economies in the world.
Quantifying future potential
It's estimated that just 15% of the world's population owns cryptocurrency today, a number that is almost guaranteed to rise in the future. Yet, with just a fraction of the world using this new technology, it was still enough to increase the total crypto market from just $12 billion in 2014 to almost $1.6 trillion today. Should this growth rate continue -- and to be sure, it may not -- the collective value of crypto could be worth an astounding $175 trillion by 2034.
If there is anything crypto has proven in its short history it is that projections often discount its true potential, and no other company is positioned better to capitalize on the burgeoning asset class like Coinbase. With its history of success, its revamped business model, and a growing international presence, a 10X gain during the next 10 years might only be scratching the surface as the crypto market evolves and Coinbase embarks on its goal to onboard 1 billion people.
