New to Crypto? Here’s what to buy in 2023.

[ad_1]

Investing in cryptocurrencies can seem daunting, especially if you really have no idea. Good luck trying to choose from over 22,000 different tokens available today. And due to the newness and underdevelopment of the industry, even though Bitcoin has been around for almost 14 years, investing in digital assets can be too daunting.

If you are new to cryptocurrencies, however, there is still hope. Here’s why you should look no further than Coinbase Global (COIN -9.18%).

Focus on industry growth

At a high level, an investment in the Coinbase cryptocurrency exchange is essentially a bet on the growth of the entire cryptocurrency industry. Yes, the company generated 63% of its Q3 revenue from unpredictable trading fees, which are absolutely fantastic for profitability in good times (like 2021) but horrible in bear markets (like 2022). This is something Coinbase points to as a reason to avoid the stock.

But the management is developing more stable sources of income. In the past quarter, Coinbase’s subscription and services, a segment that includes things like custodial services and blockchain rewards, saw revenue jump 45% year-over-year. . It is expected that over time, Coinbase and its 108 million verified users will begin to interact less with crypto as a tool for financial speculation and more in terms of actual utility.

Coinbase is primarily known as a popular brokerage and exchange for buying and selling tokens, but looking ahead I believe the company could become a crucial technology infrastructure provider for non-crypto businesses that seek to access or integrate blockchain technology into their operations. Look at Coinbase’s partnerships with BlackRock’s Google Cloud and Alphabet as two prominent examples.

And therefore betting on Coinbase is a bet on the growth of the entire industry. The silver lining to this outlook is that investors don’t have to choose which individual cryptos will win in the long run. As the industry attracts more users, capital, and developers, Coinbase stands to benefit.

A priority for trust and transparency

The recent implosion of one of Coinbase’s main competitors, FTX, has cast a shadow over an industry that is already recognized as a nexus between complex and opaque financial structures and risky behavior. Investors have lost faith in major crypto institutions. And once trust is lost and a reputation is damaged, it can be extremely difficult to regain it.

As a publicly traded company in the United States, Coinbase must follow the rules of the Securities and Exchange Commission, unlike FTX, which was based in the Bahamas. This means that Coinbase is required to provide audited financial statements to its investors. We may have no idea what a crypto company operating without this oversight has on its balance sheet. But we can be pretty sure that Coinbase is not engaging in any shady practices.

It’s easy for investors to throw the baby out with the bathwater here and ignore every company in the crypto industry, but that’s the wrong approach. I think Coinbase could prove to be a winner thanks to its focus on the safety and security of its user base.

A convincing valuation

Another important reason why investors new to cryptocurrencies should buy Coinbase stock is its attractive valuation. As of this writing, the shares are trading at a price-earnings ratio of just 4, which is the lowest level since the company went public in April 2021.

To be fair, the recent turmoil that rocked the crypto market, coupled with a general sense of risk among investors in digital assets, likely justifies Coinbase’s current low valuation. Investors are rightly hesitant to invest in an extremely volatile nascent asset class.

But I still think it makes sense to allocate a tiny percentage of a well-diversified portfolio to Coinbase.

As of September 30, the company had $5 billion in cash and cash equivalents on its balance sheet. It is not money that belongs to customers or is tied up in other activities. This is strictly Coinbase capital. Compare that cash balance to the company’s market capitalization (at the time of writing) of around $10 billion, and investors are presented with an intriguing opportunity. a smart purchase.

Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Neil Patel has positions in Alphabet and Bitcoin. The Motley Fool holds positions and recommends Alphabet, Bitcoin, and Coinbase Global. The Motley Fool has a disclosure policy.

[ad_2]