Where will Coinbase be in a year?

Just a year ago Coinbase Global (COIN 2.02%) was trading around $75 per share. Fast forward to today and it has increased significantly, rising to around $210.

For those who have joined me and invested in Coinbase recently last two yearsyou are already making significant profits. But there’s reason to believe Coinbase could rise even higher next year as it positions itself to benefit from both emerging revenue streams and a potential bull market in the cryptocurrency space. Let’s find out why.

Diversification of income streams beyond transaction fees

If you’ve been following my coverage (or any analysis of Coinbase), you know that the company has made significant strides in diversifying its revenue model over the past few years, which is a major factor in its stock’s impressive performance.

Traditionally, Coinbase has generated most of its revenue from transaction fees. This model is highly dependent on trading volume and is vulnerable to market fluctuations. Recognizing the need for stability, Coinbase began creating additional revenue streams, particularly revenue from stablecoins, which is now the second most profitable segment.

Coinbase’s stablecoin Business has flourished over the past two years thanks to a partnership with Circle, the issuer US dollar coin. Thanks to higher interest rates, Coinbase has attracted funds from USDC buyers to invest in treasury bills, which provide greater returns when rates rise.

This strategy paid off: in the third quarter of 2024, stablecoin revenue reached a record $250 million. However, this thread may suffer because Federal Reserve executes a cycle of rate cuts over the next year.

But this is where Coinbase’s diversified revenue model will begin to shine. While rate cuts may reduce stablecoin revenues, they could simultaneously trigger a new bull market in cryptocurrencies.

As rates fall, borrowing costs decrease and liquidity in the economy tends to increase. Historically, a low interest rate environment encourages risk appetite, often leading to more capital flowing into riskier assets such as cryptocurrencies (as seen in the 2021 bull market when rates were near 0%) .

With market rate cuts set to peak by mid-2025, Coinbase’s other revenue streams (such as transaction fees, blockchain fees, and custodial services), which are highly correlated with cryptocurrency prices and market activity, could begin to see significant growth . next year.

How High Can Coinbase Go?

There is one metric that can help us assess Coinbase’s potential in 2025: exchange volume. A key metric that helps us assess the stage of a crypto cycle is exchange volume, which can be seen as an indicator of investor interest and tends to rise and fall with market cycles.

At the peak of the last bull market, Coinbase had nearly $550 billion in trading volume in the fourth quarter of 2021. Today, with the cryptocurrency market recovering but still far from the highs of the last cycle, Coinbase’s trading volume is about $226 billion. This suggests not only room for growth, but also the potential to surpass previous records if another bull market forms, as crypto assets often break out of old highs in these cycles.

This potential market fluctuation has serious implications for Coinbase. At the height of the previous bull run, more than 90% of Coinbase’s revenue came from transaction fees. In contrast, transaction fees now account for only 47% of Coinbase’s revenue, reflecting Coinbase’s successful expansion into other revenue streams. This means that as volume grows, Coinbase has more ways to monetize its platform than in previous cycles, increasing its revenue potential.

As the next cryptocurrency bull market gains momentum, Coinbase could benefit not only from increased transaction fees, but also from other sources of revenue such as blockchain rewards, custody fees, and other subscriptions and services that are highly correlated with cryptocurrency prices.

While speculative, some back-of-the-envelope math suggests that if exchange volume approaches or exceeds the $550 billion peak of the last bull market, Coinbase’s diversified revenue streams could generate record revenues and profits. This will not only return Coinbase to all-time highs, but will also allow it to break new records.

So where might Coinbase be in a year? If the cryptocurrency bull market does take off along with increased liquidity from lower interest rates, Coinbase could see significant growth. With diversification efforts paying off and exchange volume set to increase, it’s no surprise to see Coinbase not only retesting its previous highs, but potentially setting new ones as well.