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👨‍🦲 Is it time to buy Coinbase?

👨‍🦲 Is it time to buy Coinbase?

PLUS: a new $100K bet

Alex M.
August 07, 2023

GM everyone. This is 2036, the crypto newsletter that pays you.

Here’s what we’re serving up today 🍲: Coinbase stock ($COIN) is the darling of institutional crypto investors. And last week, they absolutely crushed expectations. Is it time to buy Coinbase stock?

Let’s dig in.

🥔 Today’s meat and potatoes

Get smarter on crypto in 2 minutes

Bitcoin is up +75% year-to-date. But Coinbase stock is up a whopping +160% in the same time frame.

Is Coinbase a better investment than bitcoin?

Coinbase is the one-stop-shop of crypto in the West. They’ve onboarded more people into crypto than any other company.

Ironically, five years before he founded the company, Coinbase CEO Brian Armstrong wrote a book called “Breaking Free: How To Work At Home With The Perfect Small Business Opportunity.” It has 2.8 ⭐ on Amazon.

Good that you didn’t stick with the small business, Brian.

Today, Coinbase is the only pure crypto company that trades on the New York Stock Exchange.

Coinbase:

has the most user-friendly interface and suite of services for everyday people like you and me - including direct deposits, debit cards, payroll for businesses, etc.
as a result, is able to charge enormous fees (5X as much as Binance)
is one of the most trusted names in crypto (it’s a regulated publicly traded company in the US)
has one of the most impressive venture portfolios in the industry
makes a RIDICULOUS amount of money on interest ($200 million last quarter alone)
has a 10% market share in Ethereum staking
will custody crypto for all the biggest institutional firms launching ETFs (including Blackrock, the largest asset manager in the world)

… and of course - Brian Armstrong is bald.

Those are just some of the reasons Cathie Wood owns ∼$1 BILLION worth of Coinbase stock, her second-largest holding after Tesla.

She also argues that regulatory pressure (especially against Binance) will eventually make Coinbase the only player left in the US.

Okay, so is Coinbase a good investment? Here’s what you need to know…

1/ Bitcoin is a private offshore bank account you can access from anywhere using 24 words. It’s both a savings vehicle and a form of money.

$COIN is just a stock in your brokerage account. They’re fundamentally different things, and $COIN gives you leveraged exposure to the price of bitcoin - but not any of its other benefits.

2/ During bad times, Coinbase performs significantly worse than bitcoin.

That’s because Coinbase is a leveraged bet on bitcoin. When bitcoin is down = Coinbase is down a lot more 📉

bitcoin down = coinbase down a lot

But this also works the other way around: during good times, Coinbase performs significantly better than bitcoin.

When bitcoin is up = Coinbase is up a lot 🚀

That’s why Coinbase stock is up over two times as much as bitcoin, year to date.

3/ A bet on Coinbase is a double-edged bet on:

crypto
regulatory clarity in the US

For political reasons, financial authorities in the US have resolved to fight crypto.

Coinbase was recently sued by the SEC for failing to register with the SEC… even though:

there are no guidelines on how to register 🤦
the SEC greenlit them to go public in 2021 🤷

And several other regions have already approved a Bitcoin and Ether ETF - like Europe, Brazil, Canada, and Dubai. But the SEC is still hell-bent on dragging out the process as long as possible.

So while we’re optimistic about regulation in the US:

a) it is not guaranteed

b) even if it comes through, it could take longer than expected.

Joe Biden has called crypto investors “scammers and tax evaders.” And until now, the SEC has looked like the right arm of Elizabeth Warren’s anti-crypto army: