Update: Coinbase (Nasdaq: COIN) reached the target price on 25th of October 2021. Profit — 30.12% for 3 months.
Public market investment by Element One hedge-fund
About Coinbase
Coinbase Global Inc. — the biggest US cryptocurrency exchange by trading volume. The company was founded in 2012.
Sector: financial services
By the end of Q1 2021:
- 56 million verified users
- 6.1 million monthly active users
- $224 billion of assets under management
- $335 billion trading volume
Coinbase became the first public cryptocurrency exchange and debuted on Nasdaq via the direct listing on the 14th of April.
The company debuted at a price of $381, and in a little, over two months its price fell by 45% to $210. The decline in share price was affected by the downfall in the cryptocurrency market and mostly Bitcoin. For the next month and a half, the security traded in the range of $210- $250 and has now broken through the upper resistance.
Financial indicators
Sharp growth in gross revenue, operating profit, and net income.
- Capitalization $35.15 billion
- Total Assets $10.201 billion
- Total Liabilities $7.345 billion
Positive fundamentals
- Analysts predict that the cryptocurrency market will grow to $11 trillion (currently $1.3 trillion) by 2026, which will be an important catalyst for the COIN’s growth.
- The company is working hard to list as many alternative coins as possible.
- Fed Chairman Powell met with Coinbase CEO Brian Armstrong in May. It is assumed that the topic of the meeting was a discussion of the digital national currency.
- Coinbase has received a cryptocurrency storage license from German regulator BaFin.
- The company received a license to operate in Japan.
- Coinbase recently added several fiat currencies. Now clients of the crypto exchange will be able to withdraw and deposit funds not only in local currency, but also in US Dollars, Euros or Pound Sterling.
- 17 industry analysts have an average price target of $411 per share for COIN, up 61.81% from today.
- Crypto AuM Coinbase accounts for 11.1% of the total cryptocurrency market capitalization.
Risks
Trading volume on leading cryptocurrency platforms dropped 52% in June. Coinbase’s trading turnover dropped from $201 billion to $77 billion.
The chart below indicates the historical dependence of COIN revenue on the BTC price. This suggests that the company will perform significantly worse operating indicators if BTC continues to trade at current levels.
Summary
Coinbase is actively expanding its product line. The company has good prospects against the backdrop of the rapid development and increase in the capitalization of the cryptocurrency market. We expect growth on paper from 30% by the end of the year.
The risks for this investment are moderate. The main one is a possible further decline in the value of BTC if negative rhetoric and legislative restrictions of financial regulators in different countries are intense. In this regard, we recommend entering into a buy no more than 50% of the average position size, with the possibility of averaging in the range of $ 170-190.