Slowly but surely, the cryptocurrency asset class is maturing. Given its cyclical and, at times, volatile nature, this can be hard to discern, but each wave of growth is larger than the previous.
Adding to its complexity is the sheer number of cryptocurrencies on the market. New ones arrive seemingly every day, making it difficult to determine which is worthy of a spot in your portfolio. But what if there was a way to gain comprehensive exposure to the best of crypto just by holding just one stock? Well, there is.
Here are two reasons I'm buying Coinbase Global (COIN 4.13%) like there's no tomorrow.
NASDAQ: COIN
Key Data Points
A new company takes shape
It would be a huge mistake to assume that Coinbase is a good investment opportunity just because it operates in the booming crypto industry. Despite being in a rapidly growing sector, companies still need strong business models to succeed, and Coinbase has just that.
However, it wasn't always this way. In its early days, most of Coinbase's revenue came from a single source -- transaction fees. For the last decade, this proved to be enough, but when the most recent crypto winter arrived, it hit Coinbase especially hard.
As crypto prices plummeted and transaction activity dried up, Coinbase posted a monumental $1 billion loss in the second quarter of 2022. With no end in sight to the crypto winter, Coinbase's stock fell more than 90% in Dec. 2022.
But since then, things have been much different as Coinbase emerged from the bear market stronger than it entered. Take its revenue sources as evidence. As previously mentioned, Coinbase used to rely heavily on transaction fees for income. At one point, transaction fees constituted 90% of total revenue; they account for less than half today.
Picking up the slack is its new Subscriptions and Services segment. Composed of products like stablecoin revenue, blockchain rewards, interest income, and much more, Subscriptions and Services generated more than $334 million last quarter, or roughly 53% of total revenue.
Most importantly, though, Coinbase has managed to keep its expenses under control while introducing new products. The company has achieved this by implementing cost-cutting measures like automation and staff reductions, as well as embracing remote work, which has enabled them to consolidate their real estate footprint. As a result, Coinbase's expenses have reached their lowest levels in nearly three years. By all accounts, Coinbase is effectively doing more with less.
Image source: Getty Images.
Time to go global
As of last count, Coinbase commands around 60% of the U.S. crypto market. So, in recognition of its firm grasp domestically, it launched the "Go Broad, Go Deep" international expansion strategy to pursue greener pastures abroad.
While still barely a year old, the plan has been a resounding success. Some of the most noteworthy accomplishments include launching an international exchange for users to trade derivatives, setting up European headquarters in Ireland, expanding access to its flagship subscription service in 38 countries, and onboarding more than 100 new institutional investors.
More specifically, Coinbase is focused on solidifying its presence in the European Union, United Kingdom, Singapore, Canada, Brazil, and Australia. Given the ambiguity and lack of clarity surrounding cryptocurrency regulation in the United States, Coinbase has chosen to prioritize these regions where the legal landscape is more well-defined and conducive to operations. In doing so, Coinbase has roughly tripled its customer base in just a year.
The opportunity at hand
After a herculean effort to turn things around, it's safe to say Coinbase's best days remain ahead. As of the third quarter of 2023, Coinbase was about $2.2 million away from posting a net profit. While fourth-quarter results won't be released until Feb. 15, when accounting for crypto's resurgence to close out 2023, Coinbase is likely looking at its first profitable quarter since Q4 2021.
However, this might only be scratching the surface of what the future holds. Although Coinbase's stock is currently trading nearly 60% off its all-time high, the company has made remarkable progress and is a much better company than when shares were worth more than $340. Today, Coinbase is a more robust and diversified platform capable of withstanding market volatility, driving long-term growth, and riding the wave of crypto's evolution. It will only be a matter of time before Coinbase soars to new highs.
