When Coinbase (COIN) went public in April 2021 I immediately bought in at an average price of $381. I spent weeks researching the company and shared some that here just as they launched in a rather rare DPO (Direct Public Offering) as even though the company is still young, they did not need to raise funding. Their financials are solid. However, after peaking at just above $400 the very same day, the stock crashed and for the rest of the year I have been deep in the red. Reaching as low as $208, I could at least seek reassurance in the fact that it from the begining had been the smallest position in my portfolio. But here in the last quarter of the year, things are starting to look up. The stock has now mostly recovered and Coinbase could be just about to launch something huge with NFTs.
Why Coinbase had a rough start
Since my last post on Coinbase, the stock has been heavily downtrending and then again slowly recovered. How is this and exactly why? I am not proclaming to have all the answers, but I might have a good idea as to why. First of all, Coinbase was notoriously hard put an evaluation on. On one hand, it is the biggest player of its kind in a space that is commanding huge attention and hype – It is the largest crypto exchange out there. Tied to this are their incredible numbers: 68M verified users, $2.23 billion in revenue and more than $180 billion in assets on the platform as of Q2 2021. But they are also the first crypto exchange to go public and regulations and volatility all threathen the space. Also while I still in believe in my long term assessment of Coinbase’s valuation not being directly tied to Bitcoin’s valuation, we did see a pretty huge crash in the months following the company’s public offering. Naturally all this had an effect and Coinbase’s market cap dropped from more than $100 billion to less than half.
Since the drop the company has been hard at work. After delivering a great Q2 earnings beating expectations, the company started building out an office in India, one of the biggest markets in the world. Coinbase recieved a crypto custody business approval in Germany in July as the first company to ever do so and again created oppotunity in a huge market. They recently partned with the NBA – The National Basketball Association to become their official crypto platform and all the while the crypto space has seen a slow recovery back to all time highs. As of writing Bitcoin sits at just below $60.000 and Ethereum at $4000.
All in all it seems Brian Armstrong, CEO and his team have done just about everything right since the dip. They went public at a lofty valuation but have over the course of just a few quarters proven that they are worthy of such high expectations. The valuation sits now at $83 billion, right in line with their initial valuation when the company went public.
The next chapter for Coinbase might be in NFTs
While many, including myself, see Coinbase as a great way to get exsposure to the crypto space while avoding many of the tax cons of buying cryptocurrency outright – there is much more to this company. I have seen Coinbase discussed as pseudo Bitcoin ETF, in the same way that Buffet’s Berkshire Hathaway (BRK.A) might be a pseduo ETF for stocks. Now that we finally have an actual Bitcoin ETF trading under the ticker BITO and all that may become less relevant with time. More importantly, Coinbase announced on October 12 that they are launching a platform for NFTs. If you have managed to not hear about NFTs its an aabbreviation for the so called Non-Fungible Tokens: A way to verify or mint the original owner/creator of digital art. All of this happens through an extremely secure mechanism on the Ethereum blockchain. The space is home to an incredible amount of hype and new oppotunity, but also outrageously strange new concepts and some rather peculiar practices. It still remains to be seen whether or not NFTs are just a quick detour in the crypto space or part of the long term picture but here are my key takeaways of what it could potentially mean for Coinbase:
- As Coinbase launches their NFT platform, they will with their immense user count and growth be the single largest of its kind.
- The current #1 platform for NFTs called OpenSea is already valued above $1.5 billion and command only a fraction of Coinbase’s users.
- Coinbase is one of the most trusted brands in crypto uniquely positioned as the only public company of this kind and could bring massive potential to the space as a more trusted platform.
- Coinbase is still in my opinon the easiest and safest way of getting started in crypto. Their expertise in user experience and branding could easily make them the new one-stop-shop for all NFTs.
- OpenSea currently charges 2.5% on each transaction. Coinbase with its 68 million users could unlock a tidal wave of new users on NFTs, driving up NFT valuations further at turn this into revenues of hundreds of millions monthly in a near 100% profit margin market.
- Concluding remarks
NFTs are home to many off-the-charts and strange valuations, like digital artist Beeble’s ‘Everydays‘ which sold for $69.3 million, but also super interesting projects like the upcoming Danish video game ‘Ember Sword‘ are on their way. Here the players can buy land in the digital worlds through NFTs and profit from future fees of the players trading on their virtual property. Ember Sword is still far from release but have already sold virtual plots of land for more than $203 million with 70-80% of that coming from individual gamers. This could potentially have extremely interesting prospects, although digital games store Steam recently banned these kind of games from its platform entirely.
Coinbase is on an incredible pace of innovation. The stock offers versatility in the crypto space and their numbers are outstanding. The Coinbase team lead by Brain Armstrong continues to impress and NFTs could be a huge new chapter on this company’s journey. While still trading at discount compared to its price the first few days after going public, Coinbase could well be worth considering before their Q3 earnings in mid November. In my own current situation I unfortunately do not have the funds to afford more shares and lower my average, but long term I still certainly plan to add to this position.
Lastly if this read has sparked your interest in crypto and NFTs you can sign up for Coinbase using this link to recieve a little extra Bitcoin and a small kickback to the site. A few of you have already taken advantage of this offer and your support truly is appreciated.
Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.
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