JPMorgan released a prolific report on Friday setting a $300 price target for Coinbase. Gabby Jones/Bloomberg—Getty Images
It was only a year ago that the entire crypto industry was on the defensive, announcing layoffs and dodging regulators as trading all but dried up. Today, that doom and gloom has been replaced by his ETF-fueled “to the moon” chatter, and it all feels like a distant memory. Unsurprisingly, 2024 turned out to be a very good year for industry mainstay Coinbase, with its stock up nearly 70% this year to around $265, according to analysts at J.P. Morgan. It is receiving praise.
Before I turn to JPMorgan, I should note that I have seen this movie before, specifically the crypto bull markets of 2013, 2017, and 2021, and there are some useful lessons. Masu. This is the same thing that Coinbase CEO Brian Armstrong has been saying for years. The idea is that the dark days of cryptocurrencies are never as bad as they seem, and that it's easy to overstate the good times. This is true for markets in general, but especially for cryptocurrencies.
When it comes to Coinbase itself, it's true that everything has been going well lately. Not only has the company's stock soared, making it a darling of the same analysts who shut it down a year ago, but the company's management is showing more focus than in recent years. Mr. Armstrong is bucking the trend toward culture war dramas and Hollywood vanity projects and trying to make his company shine at the product level. This includes becoming Bitcoin custodians for startups like BlackRock and Fidelity, whose ETFs are fueling the current bull market while at the same time high on the popular new Base blockchain. It has earned recognition.
As a result of all this, JPMorgan released a glowing report on Friday setting a $300 price target on the company, suggesting the best is yet to come. The opportunities in developing today's blockchain use cases are equally exciting, and we look forward to seeing Coinbase participate in many of their continued evolutions. ”
Analysts may find these developments “exciting,” but as Armstrong himself warns, good times are never as rosy as they seem. For example, Coinbase may be seeing an increase in exchange and custody business, but keep in mind that these are commodity services that have tight margins and are shrinking. It's true that the company is innovating when it comes to blockchain services. The problem is that the SEC is still dipping its toes into the cryptocurrency industry and trying to stamp out new lines of business. This means it will likely be years before Coinbase can actually make money from Base or other blockchain-related services.
JPMorgan may have overstated its bullish claims on most of Coinbase's products, but its analysts pointed to parts of the company's business that could crack the door on future earnings reports. Specifically, it notes that new offshore derivatives platforms are “expanding at an incredible pace.” This is really good news for the company. Because, for better or worse, this is where crypto companies make huge profits. It provides a platform for traders to place highly leveraged bets and then cash out their positions when they become “recto,” in crypto parlance. ” In the short term, this is the business line of Coinbase that I would like to focus on the most.
jeff john roberts
jeff.roberts@fortune.com
@jeffjohnroberts
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