Is Coinbase a Sustainable Tech Enterprise in an Over-Inflated Market?
(Photo : Is Coinbase a Sustainable Tech Enterprise in an Over-Inflated Market?)

Coinbase Global (NASDAQ: COIN) is one of the latest tech juggernauts to list on the NASDAQ. Unfortunately, it's not the best time on the NASDAQ, given the poor jobs numbers that were released in May. The massive sell-off of tech stocks is enough to give one pause, and to reconsider the value proposition presented by companies like Coinbase. True to form, the euphoria around Coinbase's listing on the NASDAQ was short-lived. Among the many risks inherent in the cryptocurrency exchange company are the exorbitant prices of digital assets like Bitcoin ($50,000 - $60,000), Ethereum ($3500 - $4000), Litecoin ($300 - $350) and scores of others. In fact, the market capitalization of cryptocurrencies is hovering around $2.26 trillion - substantial by anyone's admission. 

In the US and elsewhere, Coinbase is king. It has steadily increased the number of verified users from Q1 2018 through Q4 2020 at an unprecedented clip. According to the numbers, in Q1 2018, Coinbase had 23 million users, but by Q4 2020 that number had spiked to 43 million verified users. This paints a picture of a thriving crypto exchange platform, boosted in large part by astronomical pricing of Bitcoin and altcoins. As global interest in cryptocurrency continues to grow at a steady clip, fueled in large part by institutional investment in blockchain technology and crypto, exchanges like Coinbase are reaping the rewards.

It's not just the user side that is thriving, it's the trader and investor side too. Coinbase was voted one of the best stocks to watch, for obvious reasons. It recently listed on the NASDAQ, soaring as high as $430 per share, after opening at $380 per share on IPO day. Much like Facebook - which was expected to hit the stratosphere - Coinbase has gotten off to a slow but steady start. Unlike other over-priced equities, Coinbase appears to be consolidating in a tight trading range. The declining price of the stock is macro market-related, as part of a broader sell-off of tech stocks as a risk-off approach to these assets kicks in. Yet the tech space is desperately in need of a correction, as many analysts point to overinflated market valuations which are simply unsustainable.

Does Coinbase Have Staying Power?

It's tough to say yay or nay to Coinbase in terms of its staying power. The very underpinnings of Coinbase's success are built on shaky foundations. Since there is no intrinsic value to cryptocurrency per se, and there is little global consensus as to how the industry should be regulated, exchanges like Coinbase are risky propositions. Having said that, this company represents a burgeoning industry that is growing at a rate of knots. Whether crypto bursts or not, blockchain technology is here to stay. Smart contracts and the incredible platforms upon which they are built are an indispensable part of the FinTech arena.

As time passes, there can be no denying the utility value of a diversified portfolio which encompasses crypto. And since the big hitters like Bitcoin, Litecoin, Dogecoin, Ethereum, Cardano, Binance Coin, and Ripple rely on credible exchange platforms like Coinbase. It is safe to say that there is a place in the market for this tech company. Recently, PayPal included crypto trading on its platform and so did Venmo. While Tesla CEO and founder Elon Musk has taken a stand against Bitcoins, the industry itself is one that he fully supports. It's the broad-based functionality of Coinbase which is its saving grace. It's not a Bitcoin platform it's a crypto platform.

A Low-Cost Market Leader

Currently, liquidity, volatility, and lack of regulatory oversight makes the crypto market particularly exciting to a growing base of users. If for some reason, volatility is removed from the equation, crypto will certainly not be as enticing prospect. This may adversely affect the viability of Coinbase stock, or other crypto exchange companies like it. 

Currently, the withdrawal fee for Coinbase is 0.60% of the total value of the withdrawal, which equates to $3 for a $500 withdrawal. This is significantly cheaper than competing companies such as Binance, KuCoin and eToro, et al. As a low-cost market leader in the, crypto space, Coinbase seems to be positioning itself for long-term success with traders, investors, and users of crypto currency.

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