Coinbase (NASDAQ:COIN) stock enjoys the first-mover advantage with cryptocurrency and has taken crypto mainstream with its user-friendly investment platform.
Bitcoin (CCC:BTC-USD) has attracted massive interest and investment over the last few months.
Investors have high hopes on Bitcoin’s price movement, which has driven BTC higher and it has worked in favor of Coinbase.
COIN stock is trading close to $268 today, far from its peak of $429 but with strong potential to move upwards.
I had recommended a buy in July when it was trading at $225. If you bought COIN stock then, you would be sitting on 15% gains today.
The first crypto-focused company came with an IPO at the right time. It debuted in April and was well-received by the investors.
Coinbase has simplified the process of buying and selling cryptocurrencies and garnered a massive user base.
Its Q2 numbers are proof that the company is firing on all cylinders and as BTC continues to gain, COIN stock will move higher. Let’s dig deeper in the Q2 results of the company.
Impressive Q2 Results and COIN Stock
Coinbase has an impressive growth story, and the revenue growth is proof that it is moving in the right direction. The company makes money from the crypto trading volume, and frequency.
When there is volatility in the price of crypto, the company will make money with every trade you make. It is not dependent on the price of BTC, although it is sensitive to it. Hence, a drop in the price of Bitcoin can lead to a fall in COIN stock.
The company will charge a fee for each purchase or sale transaction made on the platform. Its transaction revenue is 95% of the total revenue and the subscription revenue is the remaining 5%.
Coinbase reported an earnings per share of $6.42 for the quarter, beating analyst estimates.
The total trading volume for the company was $462 billion for Q2 and the verified users on the platform stood at 68 million. That represents an 89% rise from the same period the previous year.
The net revenue stood at $2.03 billion, which is a 1040% rise from the same quarter in the previous year.
Coinbase enjoys an early mover advantage and it has made the process of crypto investing quick and simple for new investors.
I believe 2021 will be the year for Coinbase and it will continue to report strong revenue numbers. As people continue to jump the crypto bandwagon, the company will see higher user growth.
Massive Addresable Market
Crypto investment has only begun and there is a long way to go. A lot of investors are not aware of the different crypto assets they can invest in, and Coinbase will enjoy the first-mover advantage.
Currently, its revenue is sensitive to the price of BTC but it supports more than 80 crypto assets.
As investment in crypto gains popularity, the platform will generate higher revenue and enjoy a wide user base.
Interestingly, there has been a rise in the trading volume of other crypto assets in Q2. Bitcoin forms 24% of the trading volume, Ethereum(CCC:ETH-USD) is 26% and the balance 50% are the other assets.
The global crypto market has crossed $2 trillion and is expected to grow further. I believe Coinbase has the right platform and the potential to attract users and help them with crypto investment.
The risks associated with crypto certainly apply to all investors but investing in COIN stock is an ideal way to diversify your portfolio.
Whenever a crypto asset makes a strong move, investors will be drawn towards it and Coinbase will make money through the transaction.
The Bottom Line on COIN Stock
There is ample evidence that cryptocurrency is here to stay and it could become a major currency in the next five years. This will push COIN stock higher and it could hold a strong position in the market.
It has made investment easier and enjoys several growth opportunities in the long term. Try to look at COIN stock without relating it to BTC, and you will see that the stock is a great investment.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.