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…

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
• …

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…

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.

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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…