How Coinbase’s Stock Can Increase Even Without Bitcoin Boost

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The time of dreams

Bitcoin is on the rise again and was recently trading at $ 48,000, but Coinbase Global hasn’t benefited much. It has only seen a 10% rebound since late July, even as Bitcoin has risen 60% during that time.

However, this disconnect is not worth worrying about, according to a new report from Needham analyst John Todaro, who launched a hedge on the stock on Tuesday with a buy rating and a price target of. $ 420. Coinbase (ticker: COIN) is more than a crypto-trading site and will gain in value as it becomes a ramp for more industry-related activities, Todaro claims. On Tuesday, it was trading up 0.1%, at $ 256.27.

Among the services that Coinbase now offers is staking, a process that allows crypto owners to contribute their assets to pools that help validate transactions on blockchains and earn money by doing so. Coinbase takes 25% of the fees paid to those who contribute their assets to the pools and passes the rest to users. It’s still a small part of the company’s revenue base, but it grew 271% quarter-over-quarter and Todaro calls it a major area of ​​growth for Coinbase. Coinbase is also launching other productive accounts that can help the business move beyond transactions.

The bearish case against Coinbase is that it charges high fees for each transaction and will lose customers to companies like Robinhood Markets (HOOD), which does not charge an upfront fee. Robinhood makes money with crypto the same way it makes money with stocks, reducing the spread between bid and ask prices on each trade. During its last quarter, Robinhood saw a huge leap in crypto trading, especially for Dogecoin.

We were very proud of the prices and costs we offer to customers and especially compared to our competitors, Robinhood CEO Vlad Tenev said during the company’s earnings call last week. Some companies charge transaction fees and commissions of several percentages. And Robinhood was commission free and was proud of the offer we got, and I think customers choose us for that.

Robinhood differs from Coinbase, however, in that users don’t hold their own crypto, as they can’t transfer it off the platform.

Coinbase CFO Alesia Haas said in the company’s latest earnings call that we are not competing on fees. And instead of focusing on the cheapest platform, we focus on delivering the greatest value to customers, through our custody, security and storage, in addition to executing transactions, this which is essential for bearer instruments like crypto.

Todaro believes that Coinbases’ fees are unlikely to drive users away due to the unique nature of cryptocurrencies. While stock trading fees have fallen to zero for almost all brokerage firms, crypto trading has not been commoditized in the same way, given that owning and trading tokens is more complicated than to process actions. Surveys have shown that users are more interested in the liquidity, availability and range of available tokens of an exchange or trading platform, he says.

In our opinion, Coinbase has done a good job of offering new assets and new products in a regulatory compliant manner, maintaining availability, offering large pools of liquidity and ensuring the reliability of exchanges, such as by testifies to the absence of successful exchange hacking, he wrote.

Write to Avi Salzman at [email protected]

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