Coinbase embraces revenue in addition to commissions
Crypto exchanges are historically considered risky platforms to store cryptocurrencies, and the reputation is not without reason. However, Coinbase, the US largest crypto exchange, is under the strict supervision of the US Financial Supervisory Authority SEC, and many crypto investors find it a safe place to keep a crypto portfolio.
Until now, Coinbase has made the lion's share of its revenue from crypto trading, but it is constantly diversifying its business to earn revenue from other sources. With the launch of the Bitcoin ETFs, the company is expected to make a significant profit from custodial fees.
Coinbase's stock was listed at the peak of the previous crypto boom in 2021, almost exactly three years ago, and the stock, which is highly correlated with cryptos, has yet to get back to its record levels. Currently, the stock is trading at around $211.
Coinbase, which is strongly correlated with the crypto market's trading activity, is finally finding ways to make a profit regardless of the crypto market's situation.
As the prices of cryptocoins rise, the company makes its profit from trading fees. When the crypto market cools down, the trading volume drops significantly, in which case the company's result also suffers and it has to answer difficult questions from Wall Street analysts.
Coinbase's non-trading fee income comes from four different sources: stablecoin turnover, custody fees, blockchain fees and interest income. Its income from the sources mentioned above is increasing and is starting to form an increasingly larger slice of the entire turnover. The turnover of the four mentioned sources of income grew by 78 percent year-on-year in 2023.
During this year, investors should also keep an eye on the growth of Coinbase's custodial fees, as the company was the custodian of eight bitcoin ETF funds in January. A total of eleven Bitcoin ETFs were launched. Currently, around $30 billion has flowed into bitcoin ETFs. In other words, Coinbase could make a profit by keeping an eye on Wall Street's bitcoins, and as long as bitcoin ETFs are popular, Coinbase should make money with them.
Coinbase has also launched its own blockchain called Base. The launch in August attracted a lot of attention, as it was the first blockchain created by a listed company.
In nine months, Base continues to gather attention and will function as a DeFi (Decentralized Finance) platform for institutional investors. In addition to DeFi, the platform offers private investors the opportunity to trade the Base blockchain's own meme coins. In March Base was the leading Ethereum L2 platform in terms of rewards with high trading activity. Base's daily trading volume exceeded one billion dollars in March.
Traders can position for Coinbase's stock performance through brokers operating in Finland using Vontobel's leveraged products.
Vontobel’s TLNG COIN V95 turbo offers a leveraged product for profit-seeking Coinbase's rising stock price. At the time of writing, the leverage of the product is 4.08 times, which corresponds to a leveraged product yield of 4.08 percent when Coinbase's stock rises by one percent. If, contrary to expectations, the share price falls by one percent, the leveraged product will incur a loss of 4.08 percent.
With Vontobel's leveraged products, you can also aim for a return on the falling price of the Coinbase stock. TSRT COIN V784-turbo offers a 3.58x leverage to the stock's return at the time of writing. If Coinbase's stock falls by one percent, the leveraged product will generate a profit of 3.58 percent. Turbo's value, on the other hand, decreases by 3.58 percent if Coinbase's share price rises by one percent.
Vontobel's investment products can be traded during the opening hours of the Helsinki Stock Exchange. When trading leveraged products, the risk of loss increases. Losing the entire invested capital is possible. Coinbase's share, which is the target asset, is quoted in US dollars, so the yield of the leveraged product also depends on the price changes of the EUR/USD currency pair. Investors bear Vontobel's credit risk when investing in Vontobel's products.
Risks
Investors in the products are exposed to the risk that the Issuer or the Guarantor may not be able to meet its obligations under the products. A total loss of the invested capital is possible. The products are not subject to any deposit protection.
The value of the products can fall significantly below the purchase price due to changes in market factors, especially if the value of the underlying asset falls. The products are not capital-protected
Due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.
Product and possible financing costs reduce the value of the products.
If the product currency differs from the currency of the underlying asset, the value of a product will also depend on the exchange rate between the respective currencies. As a result, the value of a product can fluctuate significantly.