Coinbase: An alternative way to invest in cryptocurrencies.

Coinbase is one of the leading platforms for buying, selling, and storing cryptocurrencies and serves as an entry point into the digital asset market for millions of users. The company has built a strong reputation as a trusted and regulated platform, while expanding beyond simple trading into a broader set of financial services. Today, Coinbase offers products such as subscriptions, custody, and payment solutions, and is working to become a place where users can manage multiple types of assets in one platform. By growing its product offering and focusing on long term development, Coinbase aims to build a more stable and diversified business over time. The question remains: Does this crypto platform deserve a spot in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Coinbase at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Coinbase, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

If you want to try Coinbase, you can sign up here to get a bonus when you create an account, verify your identity, and make a small crypto purchase. Once you do that, you will receive a bonus in Bitcoin, making it an easy way to get started while earning a little extra on your first trade.

The Business

Coinbase was founded in 2012 and has evolved from a simple retail crypto trading platform into a broad financial infrastructure provider for the digital asset economy. The company operates a platform that enables consumers, institutions, and developers to interact with crypto assets across trading, custody, payments, and onchain applications. Its business model is built around facilitating the full lifecycle of digital asset activity, from buying and selling to storing, staking, lending, and building applications on blockchain infrastructure. Coinbase generates revenue through two main segments. The first is transaction revenue, which comes from fees charged on trades executed on its platform, both from retail users through its core app and from institutions through Coinbase Prime and its exchange infrastructure. While this was historically the dominant source of revenue, the company has been actively reducing its reliance on trading activity. The second and increasingly important segment is subscription and services revenue, which includes stablecoin-related income through its partnership with Circle, staking rewards, institutional custody fees, interest income, and subscription products such as Coinbase One. This segment provides more recurring and higher-margin revenue streams and has grown significantly in recent years. At the same time, Coinbase is expanding its platform into what it calls the “Everything Exchange,” aiming to offer trading across not only crypto assets but also equities, derivatives, and other financial instruments, while also building infrastructure such as its Base blockchain and developer platform to support the broader onchain economy. Through this expansion, Coinbase is positioning itself not just as a broker or exchange, but as a foundational layer of the emerging digital financial system, where an increasing share of global economic activity could move onchain over time. Coinbase’s competitive moat is built on a combination of trust, scale, regulatory positioning, and deep technological expertise.  One of its most important advantages is its position as the most trusted and regulated platform in the crypto industry, particularly in the United States. This has allowed the company to become the preferred partner for institutions, including major banks, asset managers, and government entities, and to act as custodian for a large share of crypto assets, including a significant portion of assets held in Bitcoin and Ethereum ETFs. The scale of its custody business further reinforces this advantage, as Coinbase stores approximately 12% of all crypto globally, creating strong network effects and high switching costs for clients who rely on its infrastructure, security, and integrated product suite. As more assets are held on the platform, Coinbase can offer additional services such as staking, lending, and trading, which increases customer engagement and makes the ecosystem more sticky over time. Another key advantage lies in its diversification and platform breadth. By expanding beyond trading into subscriptions, services, and infrastructure, Coinbase has created multiple revenue streams and reduced its dependence on volatile trading volumes. This also positions the company as a critical infrastructure provider not only to end users but also to developers and third-party platforms, effectively embedding itself deeper into the crypto ecosystem. Finally, Coinbase benefits from deep crypto expertise and continuous innovation, having been early in areas such as decentralized exchange access, decentralized finance services, and blockchain infrastructure development. This technical leadership enables the company to launch new products faster, support a wider range of assets, and adapt to the rapidly evolving crypto landscape. Together, these advantages create a reinforcing ecosystem where trust attracts assets, assets enable more products, and more products increase customer retention, making it increasingly difficult for competitors to replicate Coinbase’s position as a central gateway to the onchain financial system.

Management

Brian Armstrong serves as the CEO and Chairman of Coinbase, a company he co-founded in 2012 with the goal of creating a trusted and easy-to-use platform for accessing the crypto economy. A software engineer by training, he was inspired to start Coinbase after experiencing the inefficiencies of global money transfers while working at Airbnb. Before founding Coinbase, he held roles at IBM and Deloitte and also founded UniversityTutor.com, an online tutoring platform that he ran for nearly a decade. He holds a dual bachelor’s degree in Economics and Computer Science, as well as a master’s degree in Computer Science, all from Rice University. Under his leadership, Coinbase has grown from a small crypto trading platform into one of the largest and most important companies in the digital asset ecosystem, serving both retail and institutional customers globally and becoming a publicly listed company in 2021. In addition to leading Coinbase, Brian Armstrong has pursued other entrepreneurial ventures focused on science and long-term innovation. In 2020, he founded ResearchHub Technologies, a platform designed to accelerate the pace of scientific research, where he serves as CEO. In 2021, he co-founded NewLimit, a biotechnology company focused on epigenetic reprogramming with the goal of extending human healthspan. These ventures highlight a broader ambition to apply technology to large and complex problems beyond finance, reinforcing his long-term and innovation-driven mindset. At Coinbase, Brian Armstrong is known for his strong focus on company culture and disciplined execution. He authored “The Coinbase Culture Doc,” which outlines the principles he expects employees to follow, including hiring top talent, acting like owners, prioritizing customers, fostering innovation, communicating candidly but kindly, and operating as a championship team. His leadership style is highly mission-driven and performance-oriented, with a clear emphasis on accountability and long-term thinking. He has also taken a firm stance on maintaining a focused work environment, emphasizing that Coinbase should remain dedicated to its mission rather than becoming distracted by broader societal or political debates. Brian Armstrong is also a vocal advocate for regulatory clarity in the crypto industry and has consistently positioned Coinbase as a compliance-first platform. He believes that working constructively with regulators is essential for crypto’s long-term adoption and has actively engaged with policymakers to help shape the regulatory framework for digital assets. This approach has played a key role in building institutional trust and has helped Coinbase become a preferred partner for banks, asset managers, and large financial institutions entering the space. Another important aspect of his leadership is his long-term alignment with the company. Coinbase operates with a dual-class share structure that gives him significant voting control, allowing management to prioritize long-term strategy over short-term market pressures. In a highly cyclical and volatile industry like crypto, this structure enables continued investment in products, infrastructure, and innovation during downturns, which can strengthen the company’s position over time. Leading Coinbase requires navigating an industry defined by rapid innovation, regulatory uncertainty, and significant market volatility. Brian Armstrong has demonstrated an ability to scale the company through multiple crypto cycles while expanding beyond trading into custody, staking, stablecoins, subscriptions, and developer infrastructure. This evolution reflects a broader ambition to position Coinbase as a foundational layer of the future financial system rather than just a trading platform. Given his technical background, founder mindset, long-term ownership perspective, and role as one of the most prominent advocates for regulated crypto adoption, Brian Armstrong appears well suited to lead Coinbase through its next phase of growth. His leadership is closely tied to the company’s vision and direction, which creates both concentration risk and strategic clarity, but his track record suggests a strong ability to execute on long-term opportunities in an emerging industry.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Coinbase made its IPO in April 2021, so we only have data available from that point onward. The numbers since then have been highly volatile, which reflects both the nature of the crypto industry and the structure of Coinbase’s business model. ROIC was extremely high in 2021 at 45,5%, turned deeply negative in 2022 at -23,8%, remained slightly negative in 2023, and then recovered to 14,2% in 2024 before declining again to 6,7% in 2025. This level of volatility is far above what you would typically expect from most companies and is one of the key characteristics investors need to understand when analyzing Coinbase. There are several structural reasons behind this volatility. First, Coinbase’s profitability is still heavily influenced by trading activity in crypto markets. During bull markets, trading volumes increase significantly, retail participation rises, and transaction fees expand rapidly. Because Coinbase’s platform can handle higher volumes without a proportional increase in costs, this creates strong operating leverage and leads to very high returns on capital, as seen in 2021. In contrast, during bear markets, trading activity declines sharply, which reduces revenue while much of the cost base remains in place. This causes profitability to compress quickly and can result in negative ROIC, as seen in 2022 and 2023. Second, the crypto market itself is inherently cyclical and sentiment-driven. Asset prices, user activity, and institutional participation tend to move in cycles that are often more extreme than in traditional financial markets. Since Coinbase acts as infrastructure for this ecosystem, its financial performance is directly exposed to these cycles. This makes its returns more volatile than those of traditional exchanges or financial platforms that operate in more stable markets. Third, Coinbase has been investing heavily in expanding its platform beyond simple trading. The company is building out products such as custody, staking, stablecoins, subscriptions, derivatives, and developer infrastructure. These investments increase the capital base and operating expenses in the short term, which can put pressure on ROIC, especially during weaker market environments. However, they are intended to create a more diversified and resilient business over time. Fourth, changes in the mix of revenue also play a role. Transaction revenue is highly cyclical and benefits significantly from operating leverage during periods of strong trading activity, which can lead to very high ROIC in bull markets. In contrast, subscription and services revenue, such as stablecoin income, staking, and custody, is generally more stable and less dependent on short-term market activity. These revenue streams may not scale as explosively during bull markets, but they provide a more consistent earnings base across cycles. As Coinbase continues to increase the share of revenue coming from these sources, it may smooth out the extremes in ROIC, reducing both the peaks during strong markets and the troughs during downturns, while improving the overall predictability of returns. Looking ahead, ROIC is likely to remain somewhat volatile, but the degree of volatility should gradually decline over time. The key driver of this improvement is the company’s ongoing diversification away from transaction-based revenue toward more stable income streams such as stablecoin interest, staking rewards, custody fees, and subscriptions. As these segments grow, they should provide a more predictable earnings base that is less dependent on trading volumes. At the same time, the continued expansion of the platform into what Coinbase describes as an “Everything Exchange” could create additional sources of revenue and improve capital efficiency as more services are layered on top of existing infrastructure. That said, it is unlikely that Coinbase will achieve the same level of consistency in ROIC as companies operating in more mature and stable industries. The business will probably continue to show strong returns during bull markets and weaker returns during downturns. Over a full cycle, however, the combination of operating leverage, increasing scale, and a growing base of recurring revenue should support attractive returns on capital. The key question for investors is not whether ROIC will be stable year to year, but whether the company can generate strong returns across an entire market cycle.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Coinbase made its IPO in 2021, so we only have a limited number of years to analyze, but the development already highlights the cyclical nature of the business. Equity increased in 2021, declined sharply in 2022, and then recovered strongly in 2023, 2024, and 2025, with particularly large increases in the most recent years. These movements are primarily driven by fluctuations in profitability rather than capital being returned to shareholders. Coinbase does not pay dividends, and although it repurchases shares, these are mainly used to offset dilution from stock-based compensation rather than to meaningfully return capital. As a result, changes in equity are primarily driven by retained earnings or losses in a given year. The sharp decline in 2022 is therefore best explained by the crypto bear market, where lower trading activity, falling asset prices, and weaker sentiment led to significantly lower revenues and, in some cases, losses. When a company generates losses, retained earnings decline, which directly reduces equity. This is exactly what we see in 2022. The recovery in equity in the following years reflects the opposite dynamic. As market conditions improved, trading activity increased, and Coinbase expanded its revenue streams, profitability recovered. At the same time, management focused on cost discipline and operational efficiency, which supported stronger earnings. Because Coinbase retains most of its earnings within the business, these profits accumulate on the balance sheet and lead to strong equity growth, as seen especially in 2024 and 2025. Another factor to consider is that Coinbase is still in an investment phase. The company continues to reinvest in new products, infrastructure, and expansion initiatives, including areas such as custody, staking, stablecoins, and developer tools. These investments can create some short-term pressure on profitability and therefore equity growth, but they are intended to strengthen the company’s long-term position. In strong market environments, the combination of higher revenue and operating leverage tends to outweigh these investments, leading to significant increases in equity. Looking ahead, equity is likely to continue growing over time, but not in a straight line. The key driver will remain the underlying profitability of the business, which is closely tied to activity in the crypto market. During strong market periods, Coinbase can generate substantial earnings and build equity quickly. During weaker periods, equity growth may slow or even decline if profitability turns negative. As the company continues to diversify its revenue toward more stable sources such as subscriptions, stablecoin income, and custody, equity growth should become somewhat more consistent. However, given the cyclical nature of the industry, investors should still expect fluctuations rather than steady year-by-year increases.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Coinbase made its IPO in 2021, so we only have a limited number of years to analyze, but the development clearly highlights the cyclical nature of the business. Free cash flow has been highly volatile, ranging from very strong positive levels to significantly negative, with margins following a similar pattern. In 2021, free cash flow and margins were exceptionally high, followed by a sharp decline into negative territory in 2022, before recovering strongly in 2023, 2024, and 2025. This volatility is much higher than what you would typically see in most industries and reflects the underlying dynamics of the crypto market. The primary reason for this volatility is Coinbase’s exposure to trading activity and overall market conditions. During strong markets, trading volumes increase significantly, retail participation rises, and Coinbase benefits from substantial operating leverage. Because the platform can handle higher volumes without a proportional increase in costs, a large share of additional revenue turns into cash, which explains the very high free cash flow margins seen in strong years. In contrast, during weaker markets, trading activity declines sharply, which reduces revenue while much of the cost base remains in place. This leads to a rapid decline in profitability and can result in negative free cash flow, as seen in 2022. Another important factor is the company’s ongoing investments in expanding its platform. Coinbase continues to invest in areas such as custody, staking, stablecoins, derivatives, and developer infrastructure. These investments increase expenses in the short term, which can weigh on free cash flow, especially during periods of lower revenue. However, these investments are intended to build a broader and more resilient business over time. Another factor is that cash generation can vary depending on how active customers are on the platform. When more people are trading and using Coinbase’s services, more cash flows through the business. When activity slows down, less cash is generated. Because the crypto market can change quickly, this can create noticeable swings in free cash flow from one year to the next. Despite this volatility, the underlying economics of the business are attractive when market conditions are supportive. The high free cash flow margins in positive years suggest that Coinbase has a scalable and capital-efficient model. As the company continues to grow its more stable revenue streams, such as subscriptions and services, free cash flow should become more consistent over time, even if it remains cyclical. Looking ahead, free cash flow is expected to grow over the long term, but not in a straight line. The key driver will remain activity in the crypto market, combined with Coinbase’s ability to diversify its revenue base. During strong market environments, the company should be able to generate significant free cash flow. During weaker periods, free cash flow may decline or turn negative, although management has emphasized a focus on maintaining profitability and controlling costs across different market conditions. Coinbase uses its free cash flow in a way that reflects both its growth ambitions and its positioning within the crypto ecosystem. A portion of the cash is reinvested into the business through product development, infrastructure, and expansion into new areas. At the same time, the company allocates capital toward building a crypto investment portfolio, including ongoing purchases of Bitcoin, which aligns its balance sheet with the broader growth of the crypto market. In addition, Coinbase has been actively repurchasing shares, primarily to offset dilution from stock-based compensation, while also taking advantage of periods where management believes the stock is undervalued. This flexible approach allows the company to both invest in growth and manage dilution over time. The free cash flow yield suggests that the shares are currently trading at a high valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to investigate is the level of debt, specifically whether a business has a manageable debt load that can be paid off within a period of three years. We assess this by dividing total long-term debt by earnings. After calculating Coinbase’s debt levels, I found that the company has 5,4 years’ worth of earnings in debt, which is above the preferred threshold. At first glance, this suggests that the debt level is somewhat elevated. However, this needs to be viewed in the context of the company’s overall financial position. Coinbase has built a very strong balance sheet with a large cash position, which significantly reduces the risk associated with its debt. The company holds a substantial amount of cash and has access to additional resources, giving it the flexibility to manage its obligations even during weaker periods in the crypto market. This is particularly important given the cyclical nature of the business. The increase in debt in 2025 is also worth noting. This may be related to strategic investments and acquisitions, including the acquisition of Deribit. Large transactions like this are typically funded through a mix of cash and debt, which means the higher debt level could be connected to strengthening Coinbase’s position in derivatives rather than a sign of financial stress. It is also important to remember that Coinbase operates in a highly volatile industry, where earnings can fluctuate significantly from year to year. This means that the debt-to-earnings ratio can look worse during weaker periods, even if the underlying financial position remains solid. In stronger market environments, the company’s earnings can increase rapidly, which would reduce this ratio. Overall, while the debt level is above the preferred threshold based on earnings, it does not appear to be a major concern at this stage. The company’s strong cash position and ability to generate significant earnings during favorable market conditions provide a meaningful buffer. That said, the cyclicality of the business means that it is still important to monitor how debt develops over time, especially if earnings were to remain under pressure for an extended period.

Support the Blog

I want to keep the blog free and accessible for everyone. If you enjoy the content and would like to support it, you can buy me a cup of coffee through PayPal. Every little bit helps and is truly appreciated!

Risks

Competition is a risk for Coinbase because the crypto industry is highly innovative, fast-moving, and increasingly crowded. Coinbase competes not only with other crypto exchanges but also with fintech companies, traditional financial institutions, decentralized platforms, stablecoins, and global exchanges that often operate under very different regulatory conditions. This makes the competitive landscape unusually complex. Unlike a traditional company that competes with a few clear peers, Coinbase faces competition from many directions at the same time. One of the most important competitive risks comes from other crypto-native platforms. Global exchanges such as Binance, OKX, and Bybit often offer a wider range of crypto assets, more derivatives products, and more aggressive trading features than Coinbase. Some of these competitors operate in jurisdictions with less strict regulation, which allows them to move faster, list more tokens, and offer products that Coinbase may not be able to provide due to its regulated status in the United States. This creates a difficult tradeoff for Coinbase. Its compliance-first approach helps build trust with institutions and regulators, but it can also make the platform less flexible than offshore competitors. Coinbase also faces growing competition from fintech and brokerage platforms such as Robinhood, PayPal, and Cash App. These companies already have large customer bases and can offer crypto trading as one product within a broader financial ecosystem. This is a risk because many retail users may prefer a simple and low-cost platform where they can trade stocks, crypto, and other assets in the same app. If these competitors continue to grow their crypto offerings, Coinbase may face pressure to lower its retail trading fees, which could reduce margins unless the company offsets this with higher trading volumes or growth in other areas. Competition is also increasing on the institutional side. Coinbase has built a strong position in custody and institutional trading, but this market is becoming more attractive to large financial institutions. Companies such as Fidelity, BNY Mellon, CME, and other established financial players have strong brands, deep client relationships, large balance sheets, and long histories of serving institutional customers. If these firms expand further into crypto custody, trading, or ETF-related services, Coinbase could face pressure in one of its most important growth areas.Another risk is that some competitors may be able to accept lower margins than Coinbase. Traditional financial companies can use crypto as one part of a much larger business, which means they may not need crypto to be highly profitable on its own. They can offer low-cost crypto services to attract users, deepen customer relationships, or support other parts of their platform. This could make it harder for Coinbase to maintain high fees over time, especially in retail trading. Decentralized and noncustodial platforms are another long-term competitive threat. On these platforms, users can trade directly through blockchain-based systems without relying on a centralized company like Coinbase. If more users become comfortable using decentralized exchanges and self-custody wallets, some activity could move away from centralized platforms. This risk is especially relevant for advanced crypto users who value control, lower fees, and access to a broader range of assets. Coinbase is trying to address this through products like Base and its developer platform, but decentralized competition remains an important risk.

Cryptocurrency market volatility is a risk for Coinbase because the company’s business is closely tied to the performance of the broader crypto market. A large share of Coinbase’s revenue comes from transaction fees, which fluctuate with trading activity. When crypto prices are rising and investor sentiment is strong, users trade more frequently, driving higher revenue. However, in bearish or uncertain periods, trading activity often drops off sharply, which has a direct impact on Coinbase’s top line. This pattern was especially clear in 2022, when aggressive interest rate hikes and tighter global liquidity led to a broad selloff in risk assets, including cryptocurrencies. As prices fell, both retail and institutional users reduced trading activity, and Coinbase’s revenue declined significantly. The crypto market is not only influenced by macroeconomic conditions but also by its own internal dynamics. Prices can move sharply based on changes in sentiment, regulatory developments, technological issues, or events involving other companies in the industry. Negative news, security breaches, or enforcement actions can quickly reduce confidence and lead to lower activity across platforms like Coinbase. At the same time, periods of strong optimism can drive rapid increases in trading activity. This creates a boom-and-bust pattern where Coinbase performs very well during strong markets but faces headwinds during downturns. Another important factor is that the crypto market has historically moved in cycles. These cycles are often linked to events such as Bitcoin halvings and shifts in overall market sentiment. During bull markets, activity increases significantly, leading to strong revenue growth and profitability for Coinbase. During bear markets, activity declines, which reduces revenue and can pressure profitability. This makes it difficult to predict earnings and creates uncertainty for investors. In recent years, the role of institutional investors has also increased. As more institutions participate in the crypto market, price movements have become more closely linked to broader financial markets. This means that changes in interest rates, inflation expectations, and overall risk appetite can have a larger impact on crypto prices than in the past. When institutions move into a more cautious or risk-off position, it can lead to declines in crypto prices and trading activity, which directly affects Coinbase. The volatility of crypto prices also affects demand for Coinbase’s broader product offering. Lower prices and weaker sentiment can reduce interest in trading, staking, and other services, while also slowing the growth of new users and developers on the platform. Although Coinbase is working to diversify its revenue through more stable sources such as subscriptions, stablecoin-related income, and custody services, its overall performance remains closely linked to activity in the crypto market.

Regulatory uncertainty is a risk for Coinbase because the company operates in an industry where the rules are still being defined and frequently change. Unlike traditional financial services, where regulations are well established, the crypto industry is governed by a patchwork of laws that often do not fully account for how digital assets and blockchain technology work. This creates uncertainty around how Coinbase’s products and services are classified and regulated, which can directly impact how the company operates and grows. One of the main challenges is that regulations differ significantly across countries and even within regions. Coinbase operates globally, which means it must comply with a wide range of local rules that can vary in complexity and strictness. In some jurisdictions, crypto-related activities are encouraged, while in others they are restricted or even banned. This makes it more difficult for Coinbase to scale its platform consistently and can lead to higher costs as the company needs to adapt its operations to meet different regulatory requirements. Another important risk is that new laws or interpretations of existing laws can force Coinbase to change or limit its products. Many of the company’s offerings, such as staking, stablecoin-related services, lending, and event-based products, exist in areas where regulation is still evolving. Regulators may decide that certain services should be treated as securities, banking products, or other regulated activities. If that happens, Coinbase could be required to obtain additional licenses, change how products are offered, or in some cases stop offering them altogether. This could reduce revenue and limit future growth opportunities. Stablecoins are a good example of this risk. They have become an important part of Coinbase’s business, particularly through interest income and rewards offered to users. However, regulators are increasingly focused on how stablecoins should be treated, including whether users should be allowed to earn yields on them. If new rules restrict or prohibit these rewards, it could have a direct impact on one of Coinbase’s fastest-growing and most profitable areas. There is also the risk of regulation-by-enforcement. In the absence of clear rules, regulators may take action against companies to define how laws should be applied. This creates an environment where it is difficult for Coinbase to plan long term, as decisions about what is allowed or not allowed may only become clear after enforcement actions are taken. This uncertainty can slow down innovation and make it harder to launch new products with confidence. Finally, regulatory developments can affect the entire crypto market, not just Coinbase directly. Stricter rules, negative regulatory actions, or uncertainty around legislation can reduce investor confidence and slow adoption of crypto assets. Since Coinbase’s business depends on activity in the crypto market, any slowdown in adoption or usage can indirectly affect its revenue and profitability.

Reasons to invest

The everything exchange is a reason to invest in Coinbase because it represents a major expansion of the company’s business model beyond crypto trading into a broader financial platform. The idea is simple but powerful. Instead of being a platform only for buying and selling cryptocurrencies, Coinbase aims to become a single place where users can trade all types of assets, including crypto, equities, commodities, derivatives, and prediction markets. This significantly increases the size of the opportunity and reduces reliance on any single asset class. One of the most important benefits of this strategy is diversification. Historically, Coinbase’s revenue has been heavily tied to crypto trading activity, which is highly volatile. By adding other asset classes, the company can generate revenue even when crypto markets are weak. For example, when crypto prices decline, activity in other markets such as commodities or equities can offset some of that weakness. This makes the business less dependent on crypto cycles and can lead to more stable revenue over time. The everything exchange also increases the value of the platform for existing users. Customers who already hold assets on Coinbase can now use the same platform to access more products without needing to move their funds elsewhere. This creates a more convenient experience and encourages users to keep more of their assets within the ecosystem. As users engage with more products, they tend to become more loyal, which increases customer retention and long-term value. Another important aspect is the ability to attract new users. By offering a broader range of financial products, Coinbase can appeal not only to crypto-native users but also to more traditional investors. Many investors prefer to manage all their assets in one place, and Coinbase’s expansion into equities, derivatives, and other markets positions it as a more complete financial platform. This can help drive user growth and increase the total number of assets held on the platform. The strategy also benefits from strong operating leverage. Coinbase already has the infrastructure, brand, and user base in place. Adding new asset classes does not require building an entirely new business from scratch but rather expanding on the existing platform. As more products are added, the company can generate additional revenue from the same users, which improves efficiency and profitability over time. Another key advantage is the integration with Coinbase’s broader ecosystem. The company already stores a significant amount of crypto assets and has built strong trust with both retail and institutional users. By connecting more products to these assets, Coinbase creates a flywheel effect. More assets lead to more product usage, more product usage leads to higher revenue, and that revenue can be reinvested into improving the platform and adding new features. There is also a longer-term structural opportunity. Coinbase believes that over time, many financial assets will move onto blockchain-based systems. If this happens, the distinction between crypto and traditional assets becomes less important, and platforms that are built around this technology could have an advantage. By positioning itself early as a platform that supports multiple asset types, Coinbase could become one of the leading exchanges across both traditional and digital assets.

Subscriptions and services is a reason to invest in Coinbase because it represents a fundamental shift in the company’s business model toward more stable, recurring, and predictable revenue streams. Historically, Coinbase relied heavily on transaction fees, which are highly dependent on crypto market activity and can fluctuate significantly from year to year. The growth of subscription and services revenue marks an important step toward building a more resilient business that can perform across different market conditions. This segment has already shown strong momentum, reaching all-time highs and growing significantly compared to previous market cycles, highlighting its increasing importance within the overall business. One of the main drivers of this growth is the expansion of Coinbase One, the company’s subscription offering. Coinbase One provides users with a bundle of benefits, including reduced or zero trading fees, higher rewards on stablecoin balances, and access to additional features such as a credit card that offers Bitcoin rewards on everyday spending. This model creates a recurring revenue stream while also encouraging deeper engagement with the platform. Customers who subscribe to Coinbase One tend to use more products, hold more assets, and trade more frequently, which increases their overall value to the company. Another important aspect is the way subscription and services revenue strengthens customer retention. Instead of users interacting with Coinbase only during periods of high market activity, these products create ongoing engagement. For example, users holding stablecoins to earn rewards, using a credit card for daily purchases, or staking assets are continuously interacting with the platform. This makes the relationship between Coinbase and its users more durable and less dependent on short-term market sentiment. Another key advantage is the scalability of this model. As Coinbase continues to grow its user base and increase the number of assets held on the platform, subscription and services revenue can expand without requiring the same level of incremental costs. This can support strong margins and improve the overall profitability of the business over time. In addition, the introduction of different subscription tiers allows Coinbase to target a wider range of users, from casual investors to more active traders, further expanding its addressable market. The integration of multiple products into a single ecosystem also creates a reinforcing cycle. Users who subscribe to Coinbase One may start by seeking lower trading fees but then begin to use additional features such as stablecoin rewards, staking, or the credit card. This increases their engagement and makes them more likely to remain within the platform. As more products are added and improved, this cycle becomes stronger, supporting long-term growth.

Stablecoins and payments is a reason to invest in Coinbase because it represents one of the largest and most underappreciated opportunities within the crypto ecosystem. While trading has historically been the main use case for crypto, stablecoins are increasingly emerging as a core infrastructure for global payments. Coinbase is positioning itself at the center of this shift by integrating stablecoins deeply into its platform and building the tools needed to support payments at scale. This creates a new growth engine that is less dependent on crypto price movements and more tied to real-world usage. One of the key advantages of stablecoins is their efficiency. They allow users to transfer value globally almost instantly and at very low cost compared to traditional payment systems. This makes them highly attractive for a wide range of use cases, including remittances, cross-border payments, and business transactions. As more individuals and companies look for faster and cheaper ways to move money, stablecoins are likely to gain adoption. Coinbase benefits from this trend by facilitating these transactions and integrating stablecoins into its products and services. Another important aspect is that stablecoins are becoming a foundational layer for the broader digital economy. As more assets are tokenized and moved onto blockchain-based systems, there is a need for a stable and reliable form of money to settle transactions. Stablecoins serve this role as a digital version of the dollar that can be used 24/7 across different platforms and applications. This means that the growth of stablecoins is closely linked to the growth of tokenized assets and onchain activity more broadly, both of which are long-term trends that Coinbase is targeting. Coinbase also benefits from its close relationship with USDC, one of the largest and most widely used stablecoins. By integrating USDC across its platform, Coinbase encourages users to hold and use stablecoins within its ecosystem. This increases customer engagement and creates multiple ways to generate revenue, including through interest-related income, transaction activity, and additional services built around stablecoins. As more users adopt stablecoins for everyday use rather than just trading, this can become a more stable and recurring source of revenue. Another growth driver is the expansion into payments infrastructure. Coinbase is building tools that allow businesses and developers to easily accept and use stablecoin payments. This lowers the barrier to entry for companies that want to integrate crypto into their operations and helps expand the overall ecosystem. As more businesses adopt these tools, transaction volumes can increase significantly, further strengthening Coinbase’s position. There is also an emerging opportunity in new types of digital commerce. For example, stablecoins are increasingly being used in automated systems where software can send and receive payments without human involvement. This could open up entirely new use cases, such as machine-to-machine payments or automated services that operate globally. While this area is still in its early stages, it highlights the potential for stablecoins to go beyond traditional financial applications. Another important factor is that stablecoin usage is less tied to speculation than other parts of the crypto market. While trading activity can decline sharply during market downturns, payments and transfers tend to be more consistent because they are driven by real-world needs. This means that as stablecoins become a larger part of Coinbase’s business, the company’s overall revenue may become more stable and predictable over time.

Unlock Exclusive Seeking Alpha Discounts – Level Up Your Investing With Zero Risk

If you’ve been thinking about improving your investing process, this is the easiest way to start. These offers are only available through my links, and the Premium plan even comes with a 100% risk-free 7-day trial. Try everything for a week, and if it’s not for you, just cancel. You lose nothing.

1) Seeking Alpha Premium — Try It Free for 7 Days

Access the tools I personally use every day:

• Earnings transcripts

• Stock screeners

• Deep-dive analysis

• Portfolio tracking

• Market news with context that actually matters

Special Price: $269/year (normally $299) + 7-day free trial (for new users only)

Try Premium Free for 7 Days → HERE

(Explore everything — cancel anytime during the trial and pay $0.)

2) Alpha Picks — Proven Stock Ideas

This stock-picking service has delivered +287% returns vs. the S&P 500’s +77% (July 2022–Nov 2025).Great for investors who want curated, long-term picks backed by data.

Special Price: $449/year (normally $499)

Get Alpha Picks → HERE

(Although Alpha Picks doesn’t offer a free trial, its historical outperformance means the subscription can often pay for itself quickly if results persist. For many investors, the potential return far outweighs the upfront cost).

3) Premium + Alpha Picks Bundle — Best Value

Get both services together and save $159.Perfect if you want both broad tools and high-conviction stock ideas.

Special Price: $639/year (normally $798)

Get the Bundle → HERE

(This bundle doesn’t include a free trial, but it gives you both services at a $159 discount. You get Premium’s in-depth research plus Alpha Picks’ high-performing recommendations, making it the most comprehensive option for serious investors.)

Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 4,45, which is from 2025. I have selected a projected future EPS growth rate of 11%. Finbox expects EPS to grow by 11,3% a year in the next five years. Additionally, I have selected a projected future P/E ratio of 22, which is twice the growth rate. This decision is based on Coinbase's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $68,71. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Coinbase at a price of $34,36 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 2.426, and capital expenditures were 0. The tax provision was 262. We have 269,7 outstanding shares. Hence, the calculation will be as follows: (2.426 + 262) / 269,7 x 10 = $99,67 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Coinbase's free cash flow per share at $9,00 and a growth rate of 11%, if you want to recoup your investment in 8 years, the Payback Time price is $118,48.

Conclusion

I believe that Coinbase is an interesting company with strong management. The company has built its moat through a combination of trust, scale, regulatory positioning, and deep technological expertise. ROIC has been volatile since the IPO, and while volatility is expected to continue, Coinbase should be able to generate a more stable and attractive ROIC over time as it diversifies its revenue streams. Free cash flow has also historically been volatile, and although it may become more stable in the future, fluctuations are likely to persist given the nature of the crypto market. Nonetheless, over the long term Coinbase should be able to grow its free cash flow while maintaining high margins. Competition is a risk for Coinbase because it faces pressure from many different types of players, including global crypto exchanges, fintech platforms, traditional financial institutions, and decentralized platforms, many of which can offer lower fees or a broader range of products. This could force Coinbase to reduce its pricing or lose market share, especially since some competitors operate with fewer regulatory constraints or can accept lower margins. Cryptocurrency market volatility is a risk for Coinbase because its revenue is closely tied to trading activity, which tends to increase during strong markets and decline sharply during downturns. As a result, changes in crypto prices and sentiment can lead to significant swings in revenue, profitability, and overall business performance. Regulatory uncertainty is a risk for Coinbase because the rules governing crypto are still evolving, differ across regions, and can affect how the company operates and what products it can offer. This can increase costs, limit growth opportunities, and create uncertainty around future revenue, especially if key services such as staking or stablecoin rewards are restricted. The everything exchange is a reason to invest in Coinbase because it expands the company from a crypto trading platform into a broader financial marketplace where users can trade multiple asset classes in one place. This increases the overall opportunity, improves customer retention, and reduces reliance on crypto trading by creating more diversified revenue streams. Subscriptions and services is a reason to invest in Coinbase because it shifts the business toward more stable and recurring revenue streams that are less dependent on trading activity. At the same time, it increases customer engagement and retention, helping to build a more resilient and scalable business over time. Stablecoins and payments is a reason to invest in Coinbase because it opens up a large and growing opportunity beyond trading, driven by real-world use cases such as global payments and settlements. As adoption increases, this can become a more stable and recurring source of revenue that is less dependent on crypto market cycles. I believe there are many things to like about Coinbase, and if you want exposure to cryptocurrencies, buying shares at the Ten Cap price of $99 could be a good long term investment.

If you want to try Coinbase, you can sign up here to get a bonus when you create an account, verify your identity, and make a small crypto purchase. Once you do that, you will receive a bonus in Bitcoin, making it an easy way to get started while earning a little extra on your first trade.

I hope you enjoyed my analysis! While I can’t post about every company I analyze, you can stay updated on my trades by following me on Twitter. I share real-time updates whenever I buy or sell, so if you’re making your own investment decisions, be sure to follow along!

Some of the greatest investors in the world believe in karma, and to receive, you will have to give (Warren Buffett and Mohnish Pabrai are great examples). If you appreciated my analysis and want to get some good karma, I would kindly ask you to donate a bit to the Saiga Antelope. Most of you might not know the animal, and there is a reason for that, as they are only a few of them left. If you have enjoyed the analysis and want some good karma, I hope that you will donate a little to these wonderful animals here. Even a little will make a huge difference to save these wonderful animals. Thank you.