To The Moon

Hey everyone, Wonton Investor here. Let's talk about Coinbase.

A few months ago, I laid out my thesis on $Coinbase Global, Inc.(COIN)$ . I saw it as a fantastic, foundational company, but one that was ultimately a cyclical stock. My whole strategy was built around the idea of: wait for the inevitable "crypto winter," for sentiment to sour and the price to drop, and then buy the dip on a great asset.

Today, I'm back to talk about that thesis. But I'm not here to rewrite it. I'm here to tell you I'm doubling down. Everything I believed about Coinbase's fundamental strengths is not only proving true, but the recent turn of events suggests that the boom of Coinbase - one that I previously thought was cyclical - is now seemingly leaning towards becoming permanent.

In today's discussion, I will purely dive into fundamentals and a qualitative analysis of Coinbase. I will be ignoring any financial data or valuation metrics for now, because I want to talk about the fundamentals of Coinbase first and discuss how I think it is poised for a strong growth in the coming few years. While it is true that valuation and financials are important, I firmly believe that those should come secondary to a strong fundamental in the company.

Let's Rewind: Why I Liked Coinbase in The First Place

Before we get into the new stuff, let's quickly revisit why Coinbase was on my radar to begin with. The core of my original thesis was built on three simple pillars:

A Regulatory Fortress: In an industry that often felt like the Wild West, Coinbase was the town sheriff. They prioritized compliance and regulation from day one. While other exchanges were getting slapped with fines or disappearing overnight, Coinbase was painstakingly building a fortress of trust. They were the safest, most regulated bridge for anyone in the U.S. to get into crypto.

The "Picks and Shovels" Play: I always said investing in Coinbase felt like buying a piece of the NASDAQ in the 90s. You weren't just betting on a single hot stock (or coin); you were investing in the entire ecosystem. You were buying the toll road, the picks, and the shovels that everyone - from your cousin buying their first Bitcoin to a hedge fund building a complex strategy - would need to participate in the gold rush. And what better option is there than Coinbase - the largest exchange in the US right now?

A Predictable Cyclical Nature: Finally, I saw its business model as clearly cyclical, and I saw that as an opportunity. Revenue would soar in a bull market and contract in a bear market. This wasn't a flaw; it was its nature. The plan was to use that cycle to our advantage - buy when there was blood in the streets and patiently wait for the sun to shine again.

That was the foundation. A great company with a predictable rhythm that an investor could time. But that rhythm is changing.

The Twist: Why The 'Boom' Is Becoming Permanent

My original thesis was solid, but it was based on the crypto world as it was. Two huge events have since occurred that are turning those cyclical tailwinds into what look like permanent, structural tailwinds. This doesn't change my views on the first 2 pillars of my thesis aforementioned, but rather a revision of my 3rd thesis that Coinbase is a good cyclical buy. I now think that it should be a long term hold, and here are my reasons for wanting to double down on Coinbase.

The GENIUS Act Turned Their Moat Into an Ocean

I always hung my hat on Coinbase's regulatory advantage. The GENIUS Act, signed into law on July 18th, just took that advantage and supercharged it. The U.S. government didn't just give crypto a nod of approval; it sent a formal, engraved invitation to the entire financial world. This wasn't just any bill that might improve crypto adoption, this was THE bill that financial institutions have been waiting for.

The GENIUS act stands for Guiding and Establishing National Innovation for U.S. Stablecoins Act - basically an act being passed to improve regulation on stablecoins in the US. The Act establishes a dual federal-state regulatory framework for stablecoin issuers, requiring them to meet licensing and reserve requirements, including maintaining 1:1 backing with liquid assets like U.S. dollars or short-term Treasuries. Issuers must also publish monthly reserve reports and adhere to consumer protection measures, such as prohibiting deceptive claims of government backing or FDIC insurance. The legislation clarifies that payment stablecoins are not considered securities or commodities and are subject to anti-money laundering (AML) and sanctions compliance under the Bank Secrecy Act. Foreign issuers can operate in the U.S. if they meet comparable regulations and register with the OCC

What does this mean? Well, this means that the US government is getting serious about stablecoins, and Coinbase is about to benefit from it. This act being passed ensures that stablecoins are now treated as though they are fiat currencies, boosting the security and stability of these coins issued.

Furthermore, Coinbase's direct integration with USDC allows users to top up USD into their Coinbase account and receive it directly in USDC. Similarly, users can withdraw USDC into their bank accounts and receive it in USD - all for 0 fees. Coinbase also allows users to hold USDC with an interest being paid to users passively - meaning users can effectively use Coinbase as a savings account if they wish to. This puts Coinbase in a very strong position to be the main crypto wallet for many American stablecoin crypto holders.

These tailwinds will definitely boost the stablecoin adoption in the US, which means Coinbase gets to earn more from transaction, lending, and conversion fees that users pay when they are using Coinbase's services.

The Institutional Stampede Proves The Thesis

Remember the "picks and shovels" idea? Well, the biggest construction companies in the world have just shown up and placed massive orders.

When BlackRock, the manager of trillions, launches a $1 billion tokenized fund and uses Coinbase for custody, it's a massive signal. But when JPMorgan - a bank that processes $10 trillion a day - starts building its own stablecoin on Coinbase's Base network, the thesis is no longer a theory. It's a fact.

This isn't speculative retail money that comes and goes with meme coins. This is the "smart money." This is sticky, long-term institutional capital being woven directly into Coinbase's infrastructure. They aren't just using the toll road anymore; they're building skyscrapers right next to it. This signals a deep, structural adoption that transcends market cycles.

Getting Lucky on Liberation Day

But that being said, I definitely got super lucky on Liberation Day. $Coinbase Global, Inc.(COIN)$  dipped to my target price of $150 and I bought it as a cyclical buy before all these momentum picked up. But should YOU get into Coinbase now? 

Well, I would still pick up $Coinbase Global, Inc.(COIN)$   if it came at a good price, but chances are it will be hard to get it at a super cheap price now, given how big money is now picking up on it.

So what should YOU do now? I'm not a financial advisor, so I can't really tell you anything about price targets. But one thing for sure is, if Coinbase faces a strong pullback again, I will be buying the dip.

My Takeaway: From Cyclical Play to Foundational Hold

So now you guys know what I think about Coinbase, I'm telling you that I'm doubling down on the core belief that Coinbase is the essential infrastructure of the crypto economy. But the nature of that investment has, in my mind, been upgraded.

I'm no longer looking at this as just a cyclical trade. I'm now viewing it as a long-term, foundational holding. The institutional adoption for cryptocurrencies and the signing of the GENIUS act are just symptoms of an incoming crypto wave. The temporary boom I was waiting to buy into is showing signs of becoming a permanent state of being.

As always, this isn't me telling you what to do. The biggest lesson here isn't about one stock; it's about having the conviction in your original research to recognize when an industry hits a massive inflection point. 

But that being said, we have to also do some number-crunching to further understand how all these tailwinds are playing out for Coinbase. Is Coinbase actually benefitting from them, or is this just a plain narrative that I am randomly cooking up?

So stay tuned for part 2 where I will be diving more into Coinbase's financials and some more data regarding the crypto market! Until then, don't forget to add Coinbase to your watchlist!

Peace out,

The Wonton Investor

If you enjoyed this, feel free to follow me on X at @thewontoninvest for more real-time thoughts. And don't forget to check out my Substack at thewontoninvestor.substack.com!