Analyst finds investment opportunity in Coinbase

Important facts:
  • Coinbase is the primary custodian of the BTC supporting the newly approved funds.

  • There are still some legal and regulatory challenges for Coinbase to resolve.

The arrival of a Bitcoin (BTC) spot ETF in the US stock market signals – according to an investment firm – a path of opportunity for the cryptocurrency exchange, Coinbase, and anyone investing in its shares.

The reason? The company takes care of 90% of the custody of digital assets of many of these funds.

This presents “a significant opportunity for Coinbase to generate revenue and expand its market share.” Analysis From the firm Noah Ark Capital Management.

On the same day the Bitcoin ETF was approved, shares of the exchange reached $256, surpassing marks not seen in two years, as CryptoNoticias explained.

In February, COIN shares traded above $165. Although there has been a significant increase, Current price is $270As shown in the graph trading view, Still below the highest recorded price of USD 342.

Coinbase (COIN) share price. waterfall: trading view,

According to analysis, COIN is currently trading at a Forward Price to Sales of 12.22. This refers to a financial ratio that compares the current market value of Coinbase shares to the estimated future sales (revenue) per share. In this case, the number 12.22 means that the market value of Coinbase stock is 12.22 times its estimated future sales per share.

This ratio is a valuation measurement that helps investors understand whether a stock is considered expensive or cheap relative to its future earnings. A higher number indicates that investors are willing to pay more for each unit of the company’s sales, which can be interpreted as an expectation of higher growth in the company’s sales or revenues in the future.

In Coinbase terms, the future selling price of 12.22 shows The market has positive expectations about its earnings growth,

Considering the share price and the potential income Coinbase could receive from the ETF’s custody of Bitcoin, Estimated market capitalization appreciation potential of $7.2 billion For exchange.

However, not everything is positive. “While we believe Coinbase’s institutional revenues will grow in the future, the exchange’s financial position suggests a significant decline in revenues across all institutional segments compared to 2022 from last year,” the report said.

Below is Coinbase’s 10-K report showing the above revenue decline.

For Noah’s Ark Capital Management, the market is “not pricing in the full earnings potential of Coinbase.” The reason appears to be “the loss of institutional revenue opportunities, particularly Bitcoin ETF custody fees.”

How Coinbase Became the Largest Custodian of ETFs?

In June 2023, Coinbase entered the game with a Bitcoin ETF to defuse tensions between applicant companies and the United States Securities and Exchange Commission (SEC). this is because The organization had returned the submissions because it considered them inadequate. and not being “sufficiently clear and complete”.

That is, they did not explain with sufficient clarity how the custody of the underlying asset, Bitcoin, would be carried out. Following that incident, ETF applications were resubmitted with amendments by the companies Bitwise, Ark Invest, WisdomTree, Invesco, Valkyrie, BlackRock, Franklin Templeton and Grayscale, with the clarification that the BTC custody company was aligned with Coinbase. Will be in. Which was welcomed by the regulatory body.

Following the approval of a fund based on digital currency in January this year, Coinbase Supporting the exchange began to play a fundamental role in protecting the fund’s assets. And a “surprising market share” the firm says.

With this in mind, it is important to remember that ETFs are bullish catalysts for Bitcoin, something that is effectively true, as the price of Bitcoin reached an all-time high of $73,000 last week. This also represents a financial opportunity for Coinbase,

Risks to Coinbase (and its shares)

Not all future scenarios are favorable for Coinbase; The company also has some risks due to its constant judicial confrontation with the SEC.

Let’s remember that, as CryptoNoticias reported, the SEC argues that it has the authority to sue Coinbase and other companies because they allegedly sold securities (security) not registered.

If Coinbase manages to prove its innocence on these charges, it could have a significant impact on the entire cryptocurrency ecosystem.

Noah’s Ark Capital Management analysis believes that “the actual risk may be lower than the estimated risk” regarding the trial.

“We do not believe the SEC will approve ETF trading on major US exchanges and major financial institutions will let Coinbase become the custodian of these assets if they believe the custodian will be removed in a lawsuit.”

Noah’s Ark Capital Management, investment company.

Ultimately, the firm retains its Coinbase represents “a strong buying opportunity”, Additionally, she claims to be “excited” to see where the Bitcoin ETF market evolves and what Coinbase’s increased involvement looks like.

Where can you buy Coinbase shares?

there are several Broker Stock markets and even cryptocurrency exchanges where COIN shares can be purchased. One of them is Quantfury, which can be accessed by clicking on Here And registering with promotion code L5YB9V84

the explanation: This article is written for informational purposes and is not an investment recommendation. Each investor is responsible for conducting his or her own research.

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