Leon Neal/Getty Images News In this analysis of Coinbase Global Inc. ( COIN ), we analysed its cryptocurrency exchange business and believe that it stands to benefit as interest by people to invest in cryptocurrency grows. Furthermore, we believe that besides retail customers, its institutional business which represented 56% of its assets on platform in Q3 2021, could benefit as more institutional investors invest in cryptocurrency. Additionally, we analysed its financial position and determined that it has a solid net cash position excluding customer custodial funds liabilities with positive free cash flow, which we believe bodes well for its goal to pursue M&A activity. Stands To Benefit as More People Invest in Cryptocurrency
Coinbase is one of the largest cryptocurrency exchanges in the world. It is ranked 5th in terms of trading volume in 2022 with a share of 4% of total cryptocurrency exchange trading volume according to Statista. What sets it apart is that it is the only public-listed crypto exchange in the world. Statista Coinbase 2015 2016 2017 2018 2019 2020 2021F Users (‘mln’) 2 5 13 22 30 35 73 Users Growth % 100% 150% 160% 69% 36% 17% 109% Transaction Volume (‘$ bln’) 135 105 79.9 193 1,499 Bitcoin Price $ 425 $ 952 $ 13,062 $ 3,690 $7,251 $28,769 $47,128 Bitcoin Price Growth % 37.1% 124.1% 1271.4% -71.8% 96.5% 296.7% 63.8% Revenue (‘$ bln’) 0.016 0.927 0.520 0.534 1.277 7.441 Revenue Growth % 5693.8% -43.9% 2.6% 139.3% 482.7% Coinbase’s revenue is expected to increase from just $16 mln in 2016 to a full-year 2021 revenue of $7.44 bln (based on analyst revenue consensus). Intuitively, we would have expected Coinbase’s revenue to be dependent on its transaction volume. However, we find its revenue more correlated to the price of BTC. We believe the huge revenue increase (5694%) in 2017 was due to the 1271% jump in Bitcoin ( BTC-USD ) price. In 2018, revenue actually dropped, which was also in line with the decline in BTC price. Coinbase revenue displayed a similar pattern for the following 3 years.
In 2021F however, Coinbase’s huge revenue increase of 482.7% is much higher than BTC price increase of 63.8%. It is in fact more in line with the transaction volume growth of 676.5%. The huge jump in its transaction volume meanwhile, we believe was due to the company’s IPO. Going forward, while we still expect its revenue to be dependent on BTC price, we see transaction volume playing a much more crucial role, given it has now reached a significant size ($1.499 tln based on annualized Q1 to Q3 2021 trading volume).
As the company is a leading player in the cryptocurrency exchange market, we expect the company to stand to benefit as more people become interested and begin trading in cryptocurrency as indicated by several studies. Based on a survey by Pew Research Centre, 86% of Americans are aware of cryptocurrency but only 16% indicated that they have invested in cryptocurrency. It further compares to a previous survey it did in 2015 which states that 48% have heard of cryptocurrency and only 1% either trade or used it. Thus, we believe this highlights that while people are generally well aware of cryptocurrency, many people still do not trade or invest in cryptocurrency which we believe may present growth opportunities for the company.
Additionally, another survey by the NORC at the University of Chicago found that 11% indicated that they were interested to start investing in cryptocurrency in the next 12 months. Though, it found that 62% of respondents to the survey lack enough knowledge of cryptocurrency to begin which we believe could be a barrier for people to begin trading cryptocurrency.
According to the company’s latest quarterly report , Coinbase has a verified user base of 73 mln in Q3 2021 which has increased by 109% since the end of 2020. What is even more impressive is its Monthly Active User Growth which has grown by 164% in the same period. This is possible as the MAU % of total users keeps increasing as a % of Total Users. Coinbase Users (‘mln’) 2018 2019 2020 2021F 2022F 2023F 2024F 2025F Users (‘a’) 22 30 35 73 79.4 83.0 84.9 86.0 User Growth% 69% 36% 17% 109% 9% 5% 2% 1% Monthly Active Users as % of Total Users (‘b’) 3.2% 3.3% 8.0% 10.1% 12.8% 16.3% 20.6% 26.1% Monthly Active Users as % of Total Users Growth 4.8% 140.0% 26.7% 26.7% 26.7% 26.7% 26.7% Monthly Active Users (‘c’) 0.7 1 2.8 […]
source Coinbase: Beneficiary Of Rising Institutional Crypto Investing
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