Coinbase valuation and investment thesis.

Key takeaways (spoiler alert)

  • Based on the results of my valuation model (and reserving some allowance for modelling uncertainty), Coinbase shares appear to be priced at or below fair value as of the writing of this article.
  • The current share price of Coinbase reflects only the value of its existing transaction and custody / staking businesses, and disregards the potential revenues from the expansion of its institutional and subscription-based services.
  • If I were to believe in Coinbase’s ability to successfully scale its recurring revenue businesses, there could be significant upside to my valuation.

In the first and second parts of this deep-dive series, I…


The build-up of Coinbase’s revenues, its key drivers and the cost structure of the business.

Key takeaways

  • Substantially all (96%) of Coinbase’s revenues are earned from transaction fees
  • Of this, retail transactions comprise a relatively small proportion (38%) of trading volume but a disproportionately large proportion (95%) of transaction revenues
  • Retail transactions are more reactive to asset price volatility than institutional transactions, and are driven by the number of Monthly Transacting Users (MTUs) on Coinbase; MTUs are in turn highly correlated with crypto asset prices
  • Institutional transaction are correlated with crypto asset prices but to a lesser extent than retail transactions; this is because institutions tend to invest over the market cycle and for the long term

The company’s mission, the problem it solves, its competitive position, and the key risks to Coinbase’s business.

Key takeaways

  • Coinbase’s mission is to become the most trusted and easy-to-use provider of financial services in the cryptoeconomy.
  • Coinbase removes friction in two ways, by abstracting away the technical complexity of interacting with the blockchain (simplifying use) and acting as a trusted intermediary (providing trust).
  • Coinbase has built a strong reputation as one of the most user-friendly and trusted exchanges in the US, but it faces substantial competition abroad and from alternative on-ramps to the cryptoeconomy.
  • Most of the revenues generated by Coinbase today derive from transaction fees charged on the exchange of crypto assets, particularly by retail customers. This makes…

Big Tech’s foray into financial services has significant potential for innovation and disruption. Yet, without proper regulation, it may create material risks for fair competition and financial stability.

The Apple Card, launched in partnership with Goldman Sachs in 2019. (Source: Unsplash)

In the aftermath of the Global Financial Crisis of ’08, FinTech startups took the financial services industry by storm. More agile and technologically advanced than their incumbent counterparts, these companies accelerated the digitisation and unbundling of financial services, spurring innovation by competing and collaborating with banks.

The next wave of disruption, led by Big Tech, is likely to augment the roles of both traditional financial institutions and FinTech companies. …


Panic buying, face masks and other irrational ways we have behaved in this crisis—why we do it and what we can do about it.

Photo by @markusspiske on Unsplash.

Panic buying was a widespread phenomenon observed of buyers at the start of the COVID-19 crisis. With food supplies and household products being in particular demand (toilet paper sales skyrocketed by a shocking 700% between February and March!), many supermarkets were forced to impose limits on the number of items shoppers can buy.


Resilience and agility are crucial for navigating crises. Startups are best placed to adapt and innovate, but also most at risk.

Photo by @anniespratt hosted on Unsplash.
Photo by @anniespratt hosted on Unsplash.
Photo by @anniespratt, hosted on Unsplash.

As lockdowns ease and early signs of an uptick in infection rates spark fears of a resurgence in the coronavirus, the current crisis continues to disrupt startups and the wider entrepreneurial ecosystem.

Startups have been among the hardest hit businesses

Startups and entrepreneurial ecosystems, valued at $2.8 trillion and growing at over 10% per year, are a vital part of our global economy. In addition to providing a significant source of employment, they are paving the way for a digital and more sustainable future. Yet, these businesses have been among the hardest hit by COVID-19. As sales orders have collapsed and production has ground to a halt, investors…

Park Yeung

Hobbyist writer covering fintech, entrepreneurship, and other topics. Financial analyst, economist and MBA candidate. Published by the Startup.

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