Bitwise Heralds Coinbase (COIN) As The ‘Next Amazon’: Price Targets
May 09 2024 - 4:30AM
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In a recently published report by Bitwise, the leading crypto index
fund manager, a striking comparison has been drawn between Coinbase
and Amazon, highlighting a significant yet under-reported aspect of
Coinbase’s business — the Base Layer 2 network. Titled “It’s All
About That Base (and Other Thoughts on Coinbase),” the report
authored by Matt Hougan and Juan Leon delves deep into the
financial and strategic shifts underpinning Coinbase’s latest
successes and potential future. Amazon Of Crypto? Bitwise Projects
Stellar Future For Coinbase Coinbase’s latest financial results
have been a revelation, demonstrating robust growth and operational
efficiency. The company reported $1.6 billion in net revenue,
marking a 116% increase year-over-year, significantly surpassing
Wall Street’s expectation of $1.36 billion. Profits were equally
impressive, reaching $1.2 billion with total cash reserves swelling
to $7.1 billion. Each of Coinbase’s business lines showed notable
growth: consumer trading revenue rose by 93%, institutional trading
by 105%, stablecoin revenue by 15%, blockchain rewards by 59%, and
custodial services by 64%. Related Reading: Coinbase Sees Largest
USDC Inflow Ever, What This Could Mean For Bitcoin Despite these
strong numbers, the stock has trended downwards, suggesting that
the market may not fully appreciate the depth of the company’s
strengths. However, Bitwise highlights a less conspicuous but
potentially transformative element of Coinbase’s portfolio: the
Base Layer 2 network. Launched in August atop Ethereum, Base aims
to enhance the blockchain’s throughput while lowering costs. It
operates similarly to a bar tab, aggregating transactions and
settling them in batches, thereby reducing transaction costs to
under $0.01 and speeding up processing times to less than one
second. The adoption rate of Base has been staggering. The network
saw a 74% increase in transactions quarter-over-quarter in the
first quarter, with a 40% increase in April alone compared to the
entire first quarter. The exponential growth in the number of
developers using Base, which increased eightfold, underscores the
network’s rising significance and the broader industry’s interest.
From a financial perspective, Base has been lucrative for Coinbase.
In the first quarter alone, the network generated $27.4 million in
transaction fees, of which Coinbase retained $15.5 million. This
high-margin revenue stream continued into April, adding another $11
million to Coinbase’s profits. Given these trends, Bitwise predicts
that Base could soon be contributing $10 million to $20 million in
monthly profits to Coinbase. The analogy with Amazon is rooted in
the transformation potential of Base. Just as Amazon evolved from a
simple online bookstore into a retail giant and later a dominant
force in cloud computing through Amazon Web Services (AWS),
Coinbase could similarly evolve from a crypto brokerage to a
fundamental infrastructure provider for the crypto industry.
Related Reading: Bitcoin Coinbase Premium Returns To Neutral:
Buying Push Already Over? This shift could redefine Coinbase’s role
and impact within the market, positioning it as a central
infrastructure entity in the crypto ecosystem, akin to how AWS
underpins much of today’s web services. The report concludes by
reflecting on the significance of Base for Coinbase’s strategic
direction. “[T]he early returns on Base suggest that Coinbase could
end up becoming something even greater: a core infrastructure
provider to the crypto ecosystem. And that would be a very big deal
indeed.” COIN Price Analysis Analyzing the technical landscape, the
price of Coinbase (COIN) currently faces a pivotal moment. After
dropping to $211.20 (as of press time), down 11.4% from a weekly
high of $235.79, the stock is testing significant resistance and
support levels that could dictate its short-term trajectory. The
Fibonacci retracement tool, applied from a low of $31.62 to a high
of $429.52, identifies critical price points. Presently, COIN is
contending with the $230.57 level (0.5 Fibonacci level), which acts
as the primary resistance. The 20-week Exponential Moving Average
(EMA) provides crucial support at $199.35, with the stock recently
bouncing off this level. The Relative Strength Index (RSI) stands
at 56.10, suggesting a balanced dynamic between buying and selling
pressures, with a slight tilt towards buying. The recent price
behavior, characterized by a candlestick with a small body and
longer wicks, reflects the ongoing uncertainty and cautious
sentiment among traders. Featured image from Nasdaq, chart from
TradingView.com
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