Is Wall Street Missing the Boat on Coinbase's Stablecoin Revolution?

Coinbase Company Overview

Zacks Rank #3 stock Coinbase Global (COIN) operates the largest cryptocurrency platform in the United States, supporting over 200 digital assets like Ethereum and Bitcoin. Coinbase handles the most trading volume of any US-based exchange platform. It offers consumers its primary account for the crypto economy, an institutional full-service prime brokerage platform (with deep pools of liquidity across the crypto market and a suite of products in the digital asset ecosystem. The company currently benefits from higher transaction volumes as more of the public adopts crypto.

GENIUS Act Will Provide Regulatory Clarity, Drive Growth

Stablecoins are digital assets that are built to maintain a stable value relative to a relatively “stable” asset like the US dollar. Though Coinbase’s stablecoin business is often overlooked by Wall Street investors and analysts, it is rapidly becoming an integral part of its booming business. In Q1, stablecoin revenue from the USDC stablecoin, the second-largest stablecoin in the world, shot to roughly $300 million, comprising ~15% of the company’s total revenue. The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins) is a landmark legislation that will seek to regulate the burgeoning stablecoin market in the US. The act recently passed the US Senate in a bipartisan manner and is expected to pass when it moves to the US House of Representatives. If and when the act passes, it will lend credibility to the market, drive institutional demand, and spur adoptions from ordinary crypto users.

Why is the Stablecoin Business so Exciting?

Stablecoins allow users to send money faster and cheaper and provide more ease for international transactions. In addition, stablecoin holders can ‘stake’ their holdings to earn rewards on their stablecoins without trading. Last year, stablecoins went mainstream and were responsible for more than two times the transaction volume of credit card juggernaut Visa (V). Meanwhile, Tether, the company behind the USDT stablecoin, is the most profitable company in the world per employee, generating $14 billion in profit last year with only 150 employees.

Coinbase/Circle Group Valuation is Dislocated

Coinbase is partnered with stablecoinoperator Circle Internet Group (CRCL) and receives half the revenue generated from USDC. CRCL is one of the hottest IPOs this year, with shares more than doubling since its debut last month.

However, investors may want to pay close attention to a major market dislocation. Though Circle derives all its revenue from USDC, USDC revenue only represents 14% of COIN’s business. Nevertheless, CRCL currently enjoys a market cap of ~$50 billion while COIN’s is only $87 billion. In other words, investors are vastly undervaluing Coinbase’s core crypto exchange business.

Coinbase: Analyzing the Long-term Technicals, Volume & Fibonacci Levels

COIN shares are on the precipice of emerging from a year-long base structure. As the old Wall Street adage goes, “The longer the base, the higher in space.” The Fibonacci extension levels agree and suggest that if the breakout is successful, COIN could be a $500 stock in 2026. In addition, the massive volume “skyscrapers” suggest that institutional investors are rushing to buy shares.

Coinbase is a Cash Cow

Beyond the wonderful price action and the stablecoin catalyst, Coinbase offers investors a sparkling clean balance sheet. The company’s cash hoard has grown consistently and has swelled to nearly $10 billion.

Bottom Line

Coinbase, the leading crypto exchange, is poised to capitalize on the burgeoning crypto economy, driven by increasing adoption and the often overlooked yet rapidly growing stablecoin business.

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This article originally published on Zacks Investment Research (zacks.com).

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