Coinbase (COIN) stock price has bounced back in the past few weeks, helped by the recent Bitcoin rebound. It bottomed at $146.47 in August and bounced back by 40% to the current $205. It remains in a deep correction after falling by over 27% from its highest point this year.
Coinbase is losing market share
Coinbase, the biggest cryptocurrency exchange in the US, is losing market share to other companies like OKX, Crypto.com, and Bybit. For example, data by CoinMarketCap shows that Coinbase handled $1.7 billion in cryptocurrencies on Saturday, while Binance processed $14.1 billion.
Bybit’s trading volume was $4.6 billion, while OKX handled $2.07 billion, and HTX, Gate.io, and Crypto.com handled $1.8b, $2 billion, and $4.7 billion, respectively.
This performance is mostly because of the growing market share of meme coins like Turbo, Cat in a dogs world, and Popcat. In most cases, Coinbase is often one of the last exchanges to list these tokens, which have become the most popular assets in the market.
Coinbase also has a smaller market share in the popular derivatives market. While Binance handled $14.1 billion in the spot market, its volume in the derivatives industry stood at $47 billion. Bybit handled $19 billion, while OKX and Bitget handled $19 billion and $18.9 billion.
The other big risk for Coinbase is that the exchange industry has become highly saturated. CoinMarketCap tracks 103 exchanges offering derivatives and 251 offering spot tokens.
Coinbase is diversifying its business
On the positive side, Coinbase is working to diversify its business, a move that will make it more resilient.
The most notable diversification area has been its custody business, where it has become the biggest crypto custodian in the industry.
Data by SoSoValue shows that Coinbase houses Bitcoins worth over $50 billion for companies like BlackRock, Ark Invest, Bitwise, and Grayscale. It is also a big custodian for most Ethereum ETFs.
Coinbase makes money by taking a small custodial fee for all assets that it stores. The benefit of this business is that it is highly reliable, almost in perpetuity because these ETFs will always be there.
The other important, and often overlooked part of Coinbase’s business is its Base Blockchain, which has become the fastest player in the industry.
For starters, Base Blockchain is a layer-2 network that seeks to supercharge the Ethereum network, which is known for high fees and slow transaction speeds.
Launched in 2023, Base now has 373 DeFi dApps, 1.09 million active addresses, and a total value locked (TVL) of $2.42 billion.
Most notably, Base has become the third-biggest player in the decentralized exchange (DEX) industry. Data shows that its DEX networks handled transactions worth $6.62 billion in the last seven days, making it second only to Solana and Ethereum.
Base Blockchain does not make substantial fees. Indeed, it has only made $61 million in fees this year, while Ethereum has made $2 billion.
Base can become more valuable for Coinbase if it decides to launch its token. In theory, as the fastest-growing chain, it should be more valuable than Cardano, a ghost chain valued at over $12 billion. While Cardano is well-known, it does not have anything going on in it. For example, it only has $196 million in TVL, and its DEX networks have no volume.
The best way to value Base is to compare its valuation with other big layer-2 networks. Arbitrum has a full diluted valuation of $5.12 billion, while Optimism is valued at $6.7 billion. Polygon has an FDV of $3.26 billion. Therefore, since Base is bigger than Optimism and Arbitrum, it means that its valuation could be in the $7 billion range.
Coinbase earnings and Bitcoin price action
BTC chart by TradingView
The next important catalyst Coinbase stock is Bitcoin’s price action. We believe that the coin is about to stage a strong comeback since it has formed a golden cross, with the 200-day and 50-day Weighted Moving Averages (WMA) crossing each other.
Bitcoin has also formed an inverse head and shoulders and a broadening wedge pattern, pointing to a rebound. Most importantly, November is usually Bitcoin’s best month, meaning that a rebound is possible. Coinbase often does well when Bitcoin is rising.
Read more: Chance Of Bitcoin Hitting $100,000 By Year-End At Less Than 10%
There are other potential catalysts, including the upcoming American election and the fact that the Federal Reserve is cutting interest rates.
Coinbase stock will also react to its earnings on Oct. 30. Analysts expect the numbers to show that its revenue rose by 85% YoY to $1.2 billion. For the year, its revenues are expected to be $5.6 billion.
Therefore, there are rising odds that the Coinbase stock price will jump and retest the key resistance at $272, its highest point on July 23. This rebound will happen if Bitcoin continues its recovery and moved to a record high.
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