I think Coinbase is best understood as a leveraged bet on long-term crypto adoption, rather than a normal operating business with smooth, predictable growth.
What matters most is not whether next year looks clean, but whether crypto becomes a meaningfully larger asset class over time. If that happens, Coinbase should benefit through higher trading activity, higher asset values on the platform, and growth in its custody and subscription businesses.
The business is more complex than I first assumed. Revenue does not just come from retail trading fees. The main drivers discussed were trading volume, asset prices, institutional custody / assets under management, and products like Coinbase One.
The hard part is that this is a cyclical business. Revenue and earnings can fall when crypto prices and activity weaken, which makes a normal straight-line DCF feel a bit artificial here.
The simplest way I can think about it is that Coinbase behaves a bit like a leveraged crypto proxy. If crypto prices rise materially over the next 5–10 years, Coinbase’s earnings power could expand much faster than the underlying asset because a lot of the operating base should be relatively stable.
The rough scenario we discussed was current revenue of about $6.3B, growing to roughly $12B over five years, with net margins improving from around 12% toward 20–30%. On that kind of outcome, the stock could still look undervalued from here.
What I still do not have a strong handle on is how to model the cycle properly. The key variables seem to be trading volume, crypto prices, and how much institutional custody and subscription revenue can smooth things out.
So for now, my view is basically: if I believe Bitcoin and crypto are meaningfully higher in five to ten years, Coinbase is interesting. If I do not have conviction on that, the business is probably too dependent on a cycle I cannot forecast well.
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Disclaimer
QuanD is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. QuanD holds no position in NasdaqGS:COIN. Simply Wall St has no position in any companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
