JPMorgan issued a streaming report on Friday setting a $300 price target on Coinbase. Gabe Jones/Bloomberg – Getty Images
Just a year ago, the entire cryptocurrency industry was on the defensive, announcing layoffs and fending off regulators, while trading nearly dried up. Today, all that is a distant memory, with doom and gloom replaced by ETF-fueled “to the moon” talk. Unsurprisingly, 2024 has also been a very good year for industry leader Coinbase, whose stock is up nearly 70% this year to around $265, and has drawn plaudits from JPMorgan analysts.
Before I turn to JPMorgan, let me point out that I've seen this movie before — specifically, the cryptocurrency bull markets of 2013, 2017, and 2021 — and I have an insight. It's the same thing Coinbase CEO Brian Armstrong has said over the years: that the dark times for cryptocurrencies are never as bad as they seem, and, conversely, it's easy to exaggerate the good times. This applies to markets in general, but especially true for cryptocurrencies.
As for Coinbase itself, it is true that everything is improving lately. Not only are the company's shares soaring, making it a darling of the same analysts who wrote it off a year ago, but its leadership is showing greater focus than it has in years. Armstrong resists his penchant for culture war drama and Hollywood vanity projects, and allows the company to shine on a product level. This includes being a custodian of Bitcoin for new entrants like BlackRock and Fidelity, whose ETFs are stimulating the current bull market, while also drawing praise for the popular new blockchain base.
All of this led JPMorgan to issue a gushing report on Friday setting a $300 price target for the company, and suggesting that the best is yet to come: “However, for the growth opportunity in exchange and custody offerings, we see it as an exciting opportunity also in developing use cases.” blockchain today and we expect Coinbase to be involved in much of this continued development.
Analysts may find these developments “exciting,” but as Armstrong himself warned, the good times are not quite as rosy as they seem. Note, for example, that Coinbase may see an uptick in its exchange and custody businesses, but these are commodity services with small, shrinking margins. As for blockchain services, it is true that the company is innovating. The problem is that the SEC is still having its foot on the cryptocurrency industry's throat and trying to quash any new lines of business, which means it will likely be years before Coinbase can make any real money from Base and other blockchain-related offerings.
JPMorgan may have overstated the bullish case when it comes to most of Coinbase's offerings, but its analysts have pointed to one part of the company's business that could blow the doors off upcoming earnings reports. Specifically, they point to its new offshore derivatives platform as “expanding at a tremendous pace.” This is good news for the company indeed, because, for better or worse, this is where crypto companies make big money – providing platforms for traders to make highly leveraged bets, and then cash out their positions when they get, in cryptocurrency parlance, a “rekt.” In the short term, this is the line of Coinbase's business that I will be watching closely.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
Decentralized news
Bitcoin miners It is preparing to ship thousands of machines from the United States to Ethiopia as part of an overhaul of machines before the imminent halving. (Bloomberg)
Worldcoin, a project associated with Sam Altman that scans eyeballs in exchange for digital tokens, has replaced the option of storing data on servers in favor of personal custody. (Bloc)
Startup Buzzy AI Anthropic It says that it excludes Saudi Arabia from those wishing to acquire shares in the company sold by bankrupt individuals FTX. (CNBC)
Veteran financial columnist warns investors are paying a 'genius premium' to hold shares in Michael Saylor's company The precise strategy-Bitcoin Proxy – Not viable in the long term. (Wall Street Journal)
One of the Binance executives held hostage in Nigeria has escaped while the other, a US citizen, remains detained and faces multiple tax fraud charges (CoinDesk)
Mimi, oh wait
