Coinbase Global, Inc. is a financial technology company that provides end-to-end financial infrastructure and technology for the crypto economy. The company offers retail users the primary financial account for the crypto economy, provides a marketplace with liquidity for transacting in crypto assets, and utilises ecosystem partners’ technologies and services that enable it to build crypto-based applications and accept crypto assets as payment.

Investment Overview

User-friendliness the key edge. Coinbase is one of the top two crypto exchanges in US by volume, well known for its compliant and easy-to-use offerings. These enable the firm to charge higher-than-peers commissions from its retail customers, which accounts for a vast majority of its revenue. The company also possesses Base, the Layer 2 solution that is one of the cheapest with most transactions processed, improving the speed and effectiveness of cryptoeconomy.

TAM expansion underway. Management has been looking at product and geographical expansion initiatives to broaden its total addressable market (TAM). It has launched derivatives in US and is on track to unlock the offering in EU upon its completion of MiFID license expected by yearend. Since derivatives accounted for 75% of total crypto trading volume, this sets to be a high-potential long-term driver.

Transaction volume stablising at a lower level. Although the crypto volume has cooled off as expected as the hype around Bitcoin ETFs fades, the volume has stablised at a lower level since May'24. We believe the increased mentions of crypto by the US presidential candidates will also keep the crypto market at a relatively active level, thereby supporting Coinbase's revenue.

(1) Crypto asset price and volatility risk, (2) regulatory risk, (3) TAM expansion being slower than expected, and (4) margin compression due to heightened competition.

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