More Users, More Profits
Should Coinbase experience a ten-fold increase in value, it would result in a market capitalization of approximately $300 billion. Initially, this may not seem like a promising outcome when reviewing its year-to-year financial performance. For instance, while Coinbase achieved a net income of $1.6 billion in Q4 2021 during the peak of the bull market, it later reported a $1 billion quarterly net loss just over a year later, following a harsh crypto winter.
However, the picture changes when considering the company’s progress over the past five years. Coinbase’s annual revenue, which was around $500 million five years ago, surpassed the total revenue for the entirety of 2019 even during the depths of the recent bear market. Analysts anticipate that the company will exceed $2.5 billion in revenue for the full 2023 fiscal year, representing a 400% increase compared to 2019.
Additionally, Coinbase’s active user base has expanded significantly. In Q4 2018, the company reported just 850,000 monthly active users. Furthermore, while originally focused on retail investors, Coinbase has transformed into the preferred choice for institutions interested in exploring the world of crypto. The total volume of quarterly institutional transactions has skyrocketed from $5 billion in Q4 2018 to over $65 billion in Q3 2023.
Crucially, Coinbase has demonstrated financial discipline alongside its revenue growth. By implementing cost-cutting measures such as embracing remote work and automation, the company has achieved its lowest level of expenses since 2021.
A Transformed Coinbase Landscape
During the majority of its existence, Coinbase primarily functioned as a cryptocurrency exchange facilitating buying and selling activities. However, over the past year, it has undergone a remarkable transformation, expanding its offerings of innovative products that continue to attract both retail and institutional investors.
The subscription and services segment of Coinbase, consisting of staking rewards, subscription plans, custodial services, stablecoin interest, and more, now constitutes over half of the company’s total revenue. While transaction fees remain important for Coinbase’s overall financial health, reducing reliance on them was essential to safeguard the company’s long-term viability.
To propel its growth beyond the confines of the United States, Coinbase implemented the “Go Broad, Go Deep” global strategy at the beginning of 2023, and it has yielded resounding success so far. Coinbase now operates in over 100 countries, offers its Coinbase One subscription plan in 38 countries, launched an international derivatives exchange, and provides stablecoin and staking services in more than 110 countries.
Estimating Future Potential
Presently, it is estimated that only 15% of the global population owns cryptocurrency. However, it is almost certain that this figure will rise in the future. Even with just a fraction of the world embracing this new technology, the total crypto market has surged from a mere $12 billion in 2014 to nearly $1.6 trillion today. If this growth rate persists, and that is not a given, the collective value of the crypto market could reach an astonishing $175 trillion by 2034.
Crypto has consistently defied projections throughout its brief history, underscoring its true potential. And no other company is better positioned to capitalize on the flourishing asset class than Coinbase. With its track record of success, revamped business model, and expanding international presence, projecting a 10X gain in the next 10 years may only scratch the surface as the crypto market evolves and Coinbase strives to onboard 1 billion individuals.