Coinbase: Genius Act Deep Dive

Summary Coinbase remains a strong buy due to resilient fundamentals, diversified revenue, and robust growth in subscriptions and services, even amid crypto market volatility. The GENIUS Act is a major catalyst, providing regulatory clarity for stablecoins, unlocking institutional and corporate adoption, and expanding Coinbase’s total addressable market. Despite high valuation premiums, I believe Coinbase’s rapid revenue growth and stablecoin-driven margin expansion justify the upside potential, with 81% share price appreciation possible. Risks from altcoin and Bitcoin volatility exist, but the GENIUS Act’s impact and Coinbase’s operational strength make it my top pick for crypto market exposure. Co-Authored by Noah Cox and Brock Heilig Investment Thesis While crypto markets have been volatile, I continue to believe Coinbase ( COIN ) is a strong buy. While much of the altcoin market remains in a bear market, the cryptocurrency exchange and custodian remains grounded in what, I think, are resilient fundamentals and diversified revenue base. I am extremely optimistic about the future of the American cryptocurrency exchange. The GENIUS act is the latest catalyst to power its movement higher. I think stablecoins will be a huge catalyst that will allow the cryptocurrency firm to weather any future crypto winter. Stablecoins, hence in their name, should be a far more stable form of revenue. I believe the GENIUS Act is a major new tailwind that de-risks Coinbase’s business by providing clear favorable regulation for stablecoins. Even amid patchy crypto markets, Coinbase has delivered positive adjusted EBITDA and maintained growth in subscriptions & services. To me, this indicates operational strength for Coinbase. With this, I continue to be bullish on the cryptocurrency exchange, and I think shares are a strong buy. Why I’m Doing Follow-Up Coverage One of the biggest reasons why I’m doing follow-up coverage on Coinbase is because of the fact that the company has outperformed since the last time I wrote on them back in August of last year. Since I published that coverage, Coinbase’s stock is up nearly 70%, jumping from ~$198 per share to more than $330. In comparison, the S&P 500 is up only about 9.2% in that time frame. This validates my prior thesis on Coinbase. Coinbase outperformed the market by 60.8%. I continue to track the crypto bull run. As an example, Q4 2024 trading volumes jumped (consumer + 176% year-over-year, institutional + 128% year-over-year), which has boosted Coinbase’s transaction revenue. I remain heavily focused on stablecoin-driven upside: subscription & services revenue (including USDC reserve interest) were up 64% year-over-year to $2.3 billion in 2024. Keep in mind, this came well before the proposed GENIUS Act. In my opinion, this is a strong growth pillar. GENIUS Act Deep Dive The main purpose of this article is to dive deeper into the GENIUS Act and what it means for Coinbase going forward. In my opinion, this is one of the biggest factors as to why I continue to rate the company as a strong buy. Before we dive into why the GENIUS Act is so important to the success of Coinbase, it’s important to first understand what the Act is. According to CNBC: …[the GENIUS Act is] a landmark bill that for the first time establishes federal guardrails for U.S. dollar-pegged stablecoins and creates a regulated pathway for private companies to issue digital dollars with the blessing of the federal government. It was initially proposed in February of this year, and the bill passed with a 68-30 vote just this past week. Notably, the bill passed with overwhelming cross-party support, meaning that a solid majority of members from both of the two main parties are in favor of the bill. It will now head to the House for reconciliation with the STABLE Act. Additionally, there have been key provisions and clarity surrounding the GENIUS Act that make me even more bullish on Coinbase. The Act defines “payment stablecoins” as 1:1-backed digital dollars with monthly audits, strict AML/KYC, and “freeze” capabilities — explicitly outside SEC securities jurisdiction. Additionally, it also bars issuers from implying government guarantees (no FDIC claims). I’m also incredibly encouraged by the institutional “green light” that stablecoins have received. As part of this bill, banks are now permitted to issue stablecoins if they meet reserve-backing and disclosure rules. For instance, JPMorgan’s “JPMD” on Base is a perfect example. Additionally, major global banks like Santander and Deutsche Bank are likewise exploring bank-backed tokens for settlement and payments. Lately, we’ve also been seeing corporate and fintech adoption. E-commerce (Shopify via Coinbase Commerce), payments giants, and Big Tech companies like Amazon, Walmart and Apple, are accelerating stablecoin integrations now that regulatory uncertainty is removed. The last piece of the puzzle that adds to my bullish stance on Coinbase is the TAM expansion, which should be on the horizon within the next year or so. U.S. dollar stablecoins have a market cap of about $250 billion as of mid-2025. Last year, according to the World Economic Forum : Total transfer volume… hit $27.6 trillion last year, surpassing the combined volume of Visa and Mastercard transactions in 2024. With tons of supply growth potential, I think that the market cap could reach up to $2-3.7 trillion under full institutional adoption. I believe that will happen. Given this high market cap potential, I think that Coinbase could capture 25% market share. With an average potential market cap of $2.85 trillion, if we assume Coinbase custodies 25% of the market, that equals $712 billion in assets they can custody. Valuation If we look at the valuation metrics provided by Seeking Alpha, we can immediately see that this is a very unique set of circumstances. Seeking Alpha Quant gives Coinbase an overall valuation grade of an F. Interestingly, more than half of all the grades handed out by Seeking Alpha Quant to Coinbase are Fs. And the best grade that Coinbase earns on its valuation chart is a D, and that grade comes on two metrics: forward EV/Sales and forward EV/EBITDA. Looking at the forward Non-GAAP price-to-earnings ratio, the sector median on this metric is just 10.37. Meanwhile, Coinbase has a ratio of 44.13. This is a 325% premium to the sector median, and Seeking Alpha Quant gives Coinbase a grade of an F on this metric. I’ve already mentioned that the forward EV/Sales grade is a D (which is the best grade on the sheet), but when we look at the exact ratio which is 8.22 and compare it to the sector median of 3.01, we can see that this is still a 173.45% premium to the sector median. Although these may seem like high premiums, I actually believe that these premiums are reasonable, given Coinbase’s ~76% YoY revenue growth vs. the ~6.4% for traditional finance. I also think that there are a lot of growth opportunities for Coinbase. Rising net interest income and operating leverage from stablecoin activities should further expand margins and EPS. For example, if Coinbase made just 1% net interest income spread on the over $700 billion of projected assets they will custody on stablecoins, that will equal $7 billion in additional net income that can flow, basically, directly to their bottom line. If we add a 10x price-to-earnings multiple to this $7 billion of stablecoin net interest income, this would create an additional $70 billion of market cap upside. This would give Coinbase 81% upside for shares. Of course, this assumes that there is no dilution for Coinbase shareholders. I find dilution to be unlikely. Coinbase currently has a $1 billion share buyback program outstanding. Risks While I am highly bullish on Coinbase, I will admit that it is not risk-free. Even though I think that there is 81% upside, there is still a chance that shares go down from here. First of all, I cannot lie: the altcoin market concerns me. As I wrote about on Strategy ( MSTR ) recently, I’m concerned about the depth of the financing strategies that some Bitcoin treasury companies are employing. In the case of Strategy, the company now has a series of senior and junior preferred shares they are using to borrow money to buy Bitcoin. As we saw at the beginning of the 2024 altcoin bear market, a severe bear market would compress trading volumes and fees. As we’ve seen with past slumps like the mid-2024 altcoin declines, these bear markets have sharply dented altcoin engagement, but have not hurt Coinbase’s stock price. Part of the reason that Coinbase’s stock has continued to do well when altcoins have done poorly is because of Bitcoin’s outperformance. My concern with some of these Bitcoin treasury companies is that they are now higher risk companies and some of the smaller ones (not Strategy) could face an effective margin call, which could compress Bitcoin prices. This could lower trading volumes and commissions for Coinbase. To offset this Bitcoin risk, this is why I am so optimistic on the GENIUS Act. The GENIUS Act offers the promise to bring Coinbase hundreds of billions of dollars in new deposits. I like to think of this as an all-weather cryptocurrency product that can help the company weather future cryptocurrency winters. Bottom-Line In essence, I am reaffirming my strong buy stance on Coinbase. I am hopeful for the future because of the immense upside that the GENIUS Act can provide Coinbase. So far year-to-date, Coinbase has had robust transaction volume and stablecoin growth even before the GENIUS Act passed in the U.S. Senate. In addition, the growing subscription base set a solid foundation for the company. I believe that the GENIUS Act delivers regulatory clarity that unlocks institutional and corporate stablecoin adoption. I think that this plays directly into Coinbase’s infrastructure strengths, in terms of exchange, custody and Base. This could unlock trillions of dollars for the overall stablecoin market and over $700 billion of new assets for Coinbase to custody. Being a stablecoin custodian is hard, I feel like most corporations and most traditional banks will turn to Coinbase to custody their stablecoins. While altcoin volatility does concern me, the combination of improving fundamentals, favorable regulation and massive TAM expansion makes Coinbase one of my favorite picks for scaled exposure to the maturing crypto economy. With this, roughly 300 days after publishing my last coverage, back then giving the company a strong buy rating, I continue the same sentiment in this article. Shares are still a strong buy.

Source: Seeking Alpha