• Tue. Apr 16th, 2024

Coinbase’s Diverse Offerings Propel Growth Beyond Cryptocurrency – JMP Securities

Steve Kornacki

BySteve Kornacki

Mar 23, 2024
Coinbase's Diverse Offerings Propel Growth Beyond Cryptocurrency - JMP Securities

Coinbase Expands Beyond Traditional Crypto Exchange

In a recent report, JMP Securities, a leading investment bank, praised Coinbase, the renowned crypto exchange platform, for its diversified business model extending beyond the cryptocurrency market. JMP Securities highlighted the company’s significant strides in ancillary businesses, indicating a promising trajectory for growth.

According to the report, Coinbase’s CEO, Brian Armstrong, is committed to diversification, evident in the firm’s strategic partnerships and ventures into various sectors beyond traditional crypto trading. On-chain data shows that Coinbase’s trading volumes surged in Q1 2024, with daily spot trading averaging $3.3 billion, a significant increase from the previous quarter.

Analysts at JMP Securities, led by Devin Ryan, added that launching a derivatives platform further contributed to this momentum and underlines the immense growth potential in the exchange’s crypto and ancillary services. These services include participating in tokenizing real-world assets and investments in payment solutions, exemplified by their partnership with stablecoin issuer Circle.

Coinbase Collaboration With BlackRock

Meanwhile, one of the noteworthy collaborations mentioned in the report is Coinbase’s recent partnership with the foremost asset manager, Blackrock. Under this partnership, the two firms will explore opportunities in tokenizing real-world assets, marking a significant step towards bridging the gap between traditional finance and the digital asset space.

Additionally, Coinbase is actively involved in Web3 development and decentralized applications (dApps). The company’s foray into staking to diversify its revenue streams further underscores its commitment to providing comprehensive financial services to its users.

JMP Securities believes that Coinbase’s approach of collaborating with traditional financial institutions, rather than competing with them, is key to its future success. By working with those firms seeking exposure to digital assets, Coinbase can tap into a vast pool of untapped capital, which the investment firm estimates to be around $25 trillion.

While the prospect of a spot bitcoin exchange-traded fund (ETF) remains a significant catalyst for market growth, JMP Securities acknowledges that ETF adoption may face hurdles. Nonetheless, they remain optimistic about its overall opportunity, especially the vast potential for traditional wealth management capital to enter the market.

With a ‘market outperform’ rating and a price target of $300, JMP Securities remains bullish on Coinbase’s prospects.

ARK Invest Sells $52 Million of Coinbase Shares

Meanwhile, ARK Invest, under the stewardship of Cathie Wood, has initiated a significant divestment from its Coinbase holdings. This decision follows Coinbase’s stock price surge to multi-year highs – above $270.

ARK sold 199,526 Coinbase shares across its ETFs. The sale is valued at approximately $52.3 million, based on Coinbase’s closing share price of $262. Notably, 133,533 shares (worth about $35 million) were from ARK’s ARK Innovation ETF.

Others were from the ARK Fintech Innovation ETF and ARK Next Generation Internet ETF, with 6,778 shares and 59,215, respectively. ARK’s decision to sell these Coinbase shares aligns with its overarching investment philosophy that focuses on active portfolio management to optimize returns.

This divestment represents one of ARK’s most substantial sell-offs of Coinbase shares in 2024, following previous notable sales earlier in the year. ARK’s engagement with Coinbase dates back to 2021 when it amassed a significant stake in the cryptocurrency exchange platform.

However, as Coinbase’s stock price rose, ARK has strategically adjusted its holdings to maintain a balanced and diversified portfolio.

Optimizing Portfolio Composition

In addition to its divestment from Coinbase, ARK has been actively managing its positions in other key assets within the cryptocurrency and fintech sectors. The company recently sold over 93K shares of Robinhood from its ARK Next Generation Internet ETF, generating approximately $2 million.

This divestment was motivated, in part, by compliance considerations, as ARK wanted to ensure that its Robinhood shares portfolio remained below the regulatory threshold of 5%.

Steve Kornacki

Steve Kornacki

Steve Kornacki, a respected author at Big Trends Signals, uses his deep online trading acumen to create comprehensive guides and balanced reviews, empowering traders in their digital pursuits.

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