Key Facts: COIN is up 50% so far in 2024. In the long term, Coinbase faces tough competition from other companies. Although shares of the cryptocurrency exchange, Coinbase (Nasdaq: COIN), fell 15% in three months, they maintain an increase of close to 50% so far in 2024. This could indicate a buying opportunity, as long as the bull market of bitcoin (BTC). However, there are factors that suggest the opposite. “I'm not that optimistic about Coinbase's prospects in 2024 and beyond,” says analyst Gary Alexander. In his view, it involves “more risk than reward” due, mainly, to the competitive landscape. The increase in operations on the platform may be temporary for the specialist. Chalk this up to renewed interest generated by the launch this year of bitcoin exchange-traded funds (ETFs) in the United States. In fact, he maintains that such instruments They are a competitive player for exchanges by monopolizing trade volume.
“ETFs make it easier for everyday investors to participate in bitcoin rallies, bypassing cryptocurrency wallets and exchanges altogether. “Bitcoin ETFs and potential other currency ETFs that follow have the potential to pull trading volume from exchanges like Coinbase and into 'regular' brokerages,” Gary Alexander, Wall Street stock market analyst.
In any case, as BitcoinDynamic reported, something that distinguishes Coinbase over other exchanges is that the company provides custody for multiple bitcoin ETFs. In this sense, It seems crucial that such instruments continue to gain demand and better position themselves among the competition. so that their actions continue to benefit. Contrary to what Alexander says, it seems unlikely that the success of the ETFs will be detrimental to Coinbase's share price, quite the opposite. But Coinbase faces tough competition, not from ETFs but from other exchanges, as the following image shows. The biggest rival is Binance, which has almost 8 times the trading volume and offers a greater variety of cryptoassets and trading tools.
Trading volume and amount of crypto assets held by the main exchanges. Source: CoinMarketCap. While Binance is not publicly traded, Coinbase has seen less revenue this year than publicly traded exchanges such as Robinhood. In this sense, it is not shown as the one with the highest performance either. “Coinbase may end up stuck in the middle as a platform that is not as 'vanilla' as Robinhood, but is not sophisticated enough to support professional traders like Binance,” Alexander mentioned.
Coinbase's revenue is mainly tied to altcoin trading
The analyst also distinguishes that most of Coinbase's commercial income is derived from altcoin trading, an activity that he expects to decline. “The cryptocurrency market will end up converging on a few major currencies,” he maintains in a long-term view. Meanwhile, The exchange is recognized for attracting institutional investors. In fact, in the first quarter, 82% of the volume of its operations corresponded to this sector, although this only represented 8% of the company's total income. New initiatives that generate greater income for the company in this sector may be what its actions need to emerge as winners against the competition. “A larger feature set and greater destigmatization of cryptoassets may end up attracting more institutional funds,” warns Alexander.
COIN stock price. Source: Seeking Alpha. The exchange's shares are also expensive relative to their all-time high price, which was $342 three years ago, as seen in the chart above. With all this, The specialist sees them for a sales strategy currently. “Stay away and invest elsewhere,” he said. In his eyes, “Coinbase has very little leverage to preserve its trading volume or user base.”
Clarification: This article is written for informational purposes and does not constitute an investment recommendation or financial advice.