Cash in on the Crypto Craze With Coinbase Stock

Stocks to buy

Spot Bitcoin (BTC-USD) exchange traded funds are all the rage now. Is this a net positive or a net negative for Coinbase (NASDAQ:COIN)? A deep COIN stock analysis will reveal that Coinbase and its investors can successfully capitalize on the Bitcoin ETF trend and make plenty of money in 2024.

The debate never ends. Jamie Dimon called Bitcoin a “pet rock,” but Larry Fink considers it “digital gold.” Either way, there’s no denying that the approval of spot Bitcoin ETFs was a watershed moment for the cryptocurrency market. All in all, it’s a buy signal for Coinbase stock, not a reason to sell or walk away.

COIN Stock Jumps as Coinbase Turns Profitable

After two unprofitable years, Coinbase delighted investors when it swung to a net profit in 2023’s fourth quarter, to the tune of $273 million. This was the company’s first income-positive quarter since the fourth quarter of 2021.

This positive news caused Coinbase stock to quickly spike 12.7%, but there’s greater significance than that. What’s really important here is that Coinbase is a legitimate, profitable business and not just a speculative, fly-by-night crypto startup.

Coinbase is doing so well nowadays that Ark Invest CEO Cathie Wood said Coinbase is “executing brilliantly.” At the same time, Wood reportedly sold $90 million worth of COIN stock.

Wood’s share sale shouldn’t scare sensible investors, though. Coinbase is now a hyper-growth company, with its Q4 2023 net revenue soaring 45.2% year over year to $905 million. Meanwhile, analysts had only expected Coinbase to report net revenue of $825 million.

Coinbase vs. Bitcoin ETFs

The popularity of recently approved spot Bitcoin ETFs is a double-edged sword for Coinbase. The problem for Coinbase is that traders might not need a cryptocurrency exchange if they’re busy buying and selling Bitcoin ETFs on stock exchanges.

Canaccord Genuity analysts acknowledged this potential issue, but also presented a counterargument:

“While we believe that the bitcoin ETFs could take some trading volumes away from Coinbase, their injection into the market, driving higher overall spot prices and trading volumes provide momentum to Coinbase’s business.”

A Reuters report augmented this point with a surprising statistic:

“Even after the approval of the ETFs last month, Coinbase has generated transaction revenue of $320 million in the first quarter as of Feb. 13, more than 60% of what analysts are expecting for the entire three-month period.”

In other words, Coinbase is experiencing robust transaction volume despite, or maybe even because of, the popularity of spot Bitcoin ETFs. $320 million in transaction revenue is nothing to sneeze at, so Coinbase’s investors shouldn’t worry about the Bitcoin ETF craze.

COIN Stock Analysis: A Viable Alternative to Bitcoin ETFs

I’m certainly not against owning Bitcoin outright and/or spot Bitcoin ETFs. If you’re a cryptocurrency enthusiast, you can own any combination of these assets along with some Coinbase stock.

In the final analysis, my COIN stock analysis suggests that the rise of Bitcoin ETFs is a net-positive event for Coinbase. Therefore, investors should feel free to confidently start a moderately sized Coinbase share position or add to their current position.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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