If you've been keeping up on markets, you've likely seen that cryptocurrencies are back in full force. In just 2024 alone, the asset class has jumped by nearly 50%, collectively worth more than $2.45 trillion today.
However, despite this resurgence, many indicators suggest that crypto has yet to hit its peak, making today a valuable opportunity. While combing through the thousands of cryptocurrencies in circulation can be a daunting task, there is a simpler way for investors to ride the waves of crypto's momentum, and it's not even a cryptocurrency -- it's Coinbase Global (COIN 5.77%).
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Some context first
As the first crypto native company to go public, Coinbase's stock market debut was lauded as a significant achievement in the legitimization of digital assets. However, that was almost three years ago, when crypto was at the peak of its last bull market. Since then, much has changed.
After the euphoria of the bull market faded, a brutal crypto winter ensued and dealt a catastrophic blow to Coinbase. In the depths of the crypto winter, Coinbase posted an annual loss of $2.6 billion in 2022, a far cry from 2021 when it raked in more than $3.6 billion in profits.
To its credit, as bad as the bear market was, Coinbase weathered the storm and has since risen to become an even better company. With a revamped business model, fresh international expansion strategy, and prioritization of innovation, as crypto begins to prepare for a new bull market, Coinbase's best days remain ahead.
A new Coinbase takes shape
The most glaring difference between the old Coinbase and the new Coinbase is its diversified revenue model. When crypto prices plunged in 2022, Coinbase's sole reliance on transaction fees as revenue meant that when activity on its platform dried up, so did profits.
As a testament to CEO Brian Armstrong's vision and leadership, he recognized this and steered the company in a different direction. While profits were hard to come by for all of 2022 and most of 2023, during this time Coinbase was busy building an entirely new business model.
As evidence of this transformation, consider that transaction fees make up less than half of total revenue today, a significant improvement from when they accounted for 90% of revenue a few years ago.
Coinbase's Subscription and Services segment is picking up the slack. Comprised of products such as staking rewards, stablecoin interest, and custodial fees, Subscription and Services now contributes to the bulk of revenue.
Adding to the company's transformation, Coinbase implemented an international expansion strategy in the beginning of 2023. So far, it's safe to say it's been a resounding success. With this expansion, Coinbase launched an international derivative exchange, set up European headquarters in Ireland, and grew operations to more than 100 countries.
To round out Coinbase's evolution, we can't forget about its embrace of innovation. In August 2023, Coinbase launched its very own proprietary blockchain, Base. While it's still in its early days, Base is proving that it will be a valuable asset moving forward, as it has undergone explosive growth.
In just six months, Base's total users surpassed 3 million, and its decentralized finance (DeFi) economy blossomed from just $8.5 million to more than $560 million. In that same time, the blockchain has produced more than $6 million in profits for Coinbase.
Quantifying the opportunity
By all accounts, Coinbase is firing on all cylinders. Consider that fourth-quarter 2023 was the first profitable quarter in almost two years as proof.
Here lies the opportunity for investors. As the prospect of a historic bull market looms, its diversified business model could launch the company into territory it hasn't seen.
So, rather than trying to comb through the thousands of cryptocurrencies on the market, why not own the company that relies on the market as a whole? From this angle, Coinbase effectively becomes a proxy to gain exposure to the best of the crypto asset class.
As impressive as Coinbase's turnaround was, it still trades at roughly 30% below its all-time high. Accounting for the fact that it is a far better company than when it was trading for $345, plus the added benefit of a crypto bull market, the potential upside of Coinbase is difficult to quantify. Don't be surprised if Coinbase ends up outperforming many cryptocurrencies in the coming months.
RJ Fulton has positions in Coinbase Global. The Motley Fool has positions in and recommends Coinbase Global. The Motley Fool has a disclosure policy.
