JPMorgan’s Bullish Bet on Coinbase: Can the Crypto Giant Deliver?
Coinbase’s stock has surged nearly 70% this year, making it a darling of analysts who wrote it off a year ago.
As I sat down to write this article, I couldn’t help but think of the rollercoaster ride that Coinbase has been on. From being written off by analysts just a year ago to now being touted as a darling of the crypto industry, the company’s stock has surged nearly 70% this year. And it’s not hard to see why. With CEO Brian Armstrong resisting his penchant for culture war drama and Hollywood vanity projects, the company is finally shining on a product level.
One of the key areas where Coinbase is excelling is as a Bitcoin custodian for newcomers like BlackRock and Fidelity, whose ETFs are turbocharging the current bull market. The company’s popular new Base blockchain is also winning acclaim. But as JPMorgan’s recent report highlighted, there’s more to Coinbase’s success than just its exchange and custody business.
“The company’s leadership is showing more focus than in years, and it’s paying off.” - Brian Armstrong, CEO of Coinbase
However, as I dug deeper into JPMorgan’s report, I couldn’t help but feel that the bank may have overstated the bull case for most of Coinbase’s offerings. While the company may be seeing an uptick in its exchange and custody business, these are commodity services with small and shrinking margins. And as for blockchain services, it’s true that the company is innovating, but the SEC still has its foot on the crypto industry’s throat and is trying to stamp out any new business lines.
The SEC’s regulatory hurdles are still a major obstacle for Coinbase’s blockchain ambitions.
So, where does Coinbase’s real potential lie? In my opinion, it’s in its new offshore derivatives platform, which is scaling at a tremendous pace. This is where crypto companies make big money by providing platforms for traders to make hugely leveraged bets and then cashing in their positions when they get ‘rekt’. In the short term, this is the Coinbase business line to watch most closely.
Coinbase’s derivatives platform is where the real money is being made.
As I conclude this article, I’m left wondering if Coinbase can truly deliver on its promise. With JPMorgan’s bullish report and the company’s surging stock, the stakes are high. But with its focus on product and its innovative approach to derivatives, I’m cautiously optimistic about Coinbase’s future.
What do you think? Can Coinbase deliver on its promise? Let me know in the comments below.
