Research Summary
The report discusses the potential for Coinbase, a leading cryptocurrency company, to double its revenue by 2025. It outlines three key strategies: offering a new product in derivatives trading, acting as a Bitcoin custodian for most Bitcoin ETF providers, and capitalizing on the return of retail investors to the crypto market.
Key Takeaways
Derivatives Trading as a New Revenue Stream
- Introduction of Derivatives Trading: Coinbase plans to launch a derivatives trading platform, a sector that accounts for over 73% of the monthly volume in crypto. This could significantly boost Coinbase’s revenue, given the massive volume in the derivatives sector.
- Revenue Potential: If Coinbase charges a premium fee of 0.1% and captures 25% of Binance’s market share in the derivatives market, it could generate around $3 billion per year, effectively doubling its 2022 revenues.
Bitcoin Custodian for ETF Providers
- Role as Bitcoin Custodian: Coinbase is set to be the custodian for most Spot Bitcoin ETFs, holding large amounts of Bitcoin and charging a fee for this service. While this won’t be a major part of their overall revenue, it could still provide a significant boost.
Return of Retail Investors
- Impact of Market Cycles: Coinbase’s revenue from platform fees fluctuates with market cycles. In bull markets, when trading activity is high, the company makes a lot of money from platform fees. In 2021, 88% of Coinbase’s ~$7.4 billion revenue came from platform fees.
- Anticipated Bull Market: The report suggests a high likelihood of a bull market in 2024, which could significantly boost Coinbase’s revenue from platform fees.
Overall Revenue Growth
- Revenue Doubling Potential: Through these strategies, Coinbase could potentially double its revenue by 2025. This could attract significant attention from Wall Street and further legitimize the crypto industry.
Actionable Insights
- Monitor Coinbase’s Expansion into Derivatives Trading: As Coinbase ventures into derivatives trading, it’s crucial to keep an eye on its progress, including the fees it charges and the market share it captures.
- Track Market Cycles: Given the impact of market cycles on Coinbase’s revenue, particularly from platform fees, tracking market trends could provide insights into the company’s financial performance.
- Assess the Impact of Bitcoin ETFs: With Coinbase set to be the custodian for most Spot Bitcoin ETFs, assessing the impact of these ETFs on the company’s revenue could be beneficial.
