If the 4Q23 results and following stock price reaction are indicative of future expectations, Coinbase is a turnaround story with improving fundamentals. The company is the largest US-based cryptocurrency exchange platform with industrial strength and regulatory compliant architecture. Coinbase processed $470 billion in crypto transactions last year, generating $3.1 billion in revenue. Poor investor sentiment from the “crypto winter” appears to be thawing and we believe the company is well positioned to benefit from this trend. Coinbase enables consumers and businesses with a suite of capabilities, including the ability to buy/sell, trade, exchange, and cash out of crypto, use Coinbase wallets, payment cards and participate in Bitcoin collateral-based borrowing. Furthermore, the company is the co-manager of the 1:1 fully US dollar backed stablecoin, USDC. Coinbase generated approximately $700 million in 2023 revenue from processing USDC alone, a 200% increase over 2022. In terms of technology and regulatory compliance spend, the company spent $2.3 billion in 2023 and expects costs to continue to rise in the near term. In our opinion, Coinbase operates at the nexus of a new payment frontier and represents a high profile example for self-education on all things blockchain and crypto in the Fintech world.
