Coinbase is a place for people to buy and sell popular cryptocurrencies, such as bitcoin and ether. Coinbase is the largest cryptocurrency exchange in the U.S., which makes it a convenient place for Americans to buy and sell crypto.
The company went public in 2021, which leads to the question of how to buy Coinbase stock. And, perhaps more importantly, whether Coinbase stock is a good buy, particularly as it has struggled to keep pace with its initial public offering (IPO) price.
Does that mean the stock is a bargain, or is it a warning sign telling you to stay away? The real answer is a bit more complicated and requires a deeper dive into Coinbase stock.
|Company name||Coinbase Global, Inc.|
|Founder(s)||Brian Armstrong, Fred Ehrsam|
|Location||Decentralized; no physical headquarters|
|Number of employees||3,700+|
|IPO date||IPO took place on April 14, 2021|
Coinbase was founded in 2012 by co-founders Brian Armstrong and Fred Ehrsam. When it was first founded, the company’s mission was to enable anyone to safely and securely send bitcoin from anywhere. Since then, the crypto exchange has evolved to include many of those most popular cryptocurrencies, such as ether (the coin that runs on the ethereum network), tether, and USD coin. Coinbase describes itself in its SEC filing as powering the cryptoeconomy.
As of 2021, Coinbase has more than 3,700 employees. In May 2021, the company announced it would close its former headquarters in San Francisco. Now, the company is entirely decentralized and doesn’t have a physical headquarters. The company makes money by charging transaction fees for trades on the platform.
As of May 12, 2022, Coinbase has a market capitalization of $11.92 billion. Market cap is the market valuation of a company. It’s found by multiplying the number of shares by a company’s share price.
Why do people want to invest in Coinbase?
Simply put, Coinbase’s status as the largest cryptocurrency exchange in the U.S. makes it attractive to stock market investors. Coinbase is popular because it makes it relatively easy to buy and sell cryptocurrency.
Coinbase supports more than 100 of the most cryptocurrencies on its platform. It already has more than 89 million verified users and is used in 100 countries. Nevertheless, Coinbase plans to scale globally.
It plans to use a “go broad and go deep” approach, where it will launch cryptocurrency products such as Coinbase Wallet, which stores cryptocurrency and NFTs. The company also said it will hire 2,000 new employees as it continues to expand its crypto asset offerings.
Recently, Coinbase launched an NFT marketplace and announced it is now available in India. (An NFT is a digital asset that represents a real-world object such as art or music.) Going forward, the company’s mission will be one of “bringing more economic freedom to each and every individual and business around the world.”
Reasons to invest in Coinbase
One reason Coinbase appeals to investors is its popularity. As the most popular cryptocurrency exchange in the U.S., Coinbase has a huge volume of trading on its platform. In terms of dollar value, the quarterly volume of trades on Coinbase has topped $500 billion, and it has $278 billion worth of assets on the platform as of May 12, 2022.
Because it makes money primarily through transaction fees, that trading volume has produced substantial earnings. For instance, in Q4 2021, the company brought in $2.5 billion with a net profit of 33%. Net profit is the amount of money a business earns after deducting operating, tax, and interest expenses.
Price targets for Coinbase stock tend to be much higher than its current price, which could indicate that there is a lack of investor confidence or that the stock could be undervalued. A price target is an analyst’s projection for the future price of a security such as a stock.
If the current price targets come true, those who buy in now could see a return on their investment. But price targets, as with weather forecasts, are merely a projection and not a guarantee of future performance.
Pros of buying Coinbase stock
- Company is expanding into new markets and rolling out new products
- Significant earnings and a healthy net profit
- Could be undervalued
Reasons to avoid Coinbase
Although Coinbase has a lot going for it, there are some things investors should keep in mind before going all in. Investing money in individual companies always comes with a certain level of risk, and Coinbase stock is no exception.
The first thing of which you should be aware is the price trend for Coinbase stock. Although its low share price was mentioned as a possible pro in the previous section, it could also be a con, depending on your outlook.
With the exception of a rise in price in late 2021, Coinbase stock has mostly been on a downward trend since its IPO. At the time of the rise in 2021, popular cryptocurrencies such as bitcoin were spiking, which naturally influences the price of Coinbase stock.
However, after closing its first trading day at $328.28, Coinbase shares have since fallen to less than one-third of that price as of May 12, 2022.
In fact, on May 9, 2022, Coinbase had the worst single-day decline in history according to MarketWatch and has fallen 70.74% year-to-date. The current declines come as investors look to reduce their exposure to speculative assets amid economic uncertainty and the Fed’s corresponding interest rate hikes.
Coinbase also saw a significant loss of income in the first quarter of 2022, coming in below Wall Street forecasts. Its net income saw a loss of $430 million. Some might see this as an opportunity to buy in hope that the price will rise, while others might see this as a reason to steer clear.
As of May 12, 2022, bitcoin prices were down 40.50% YTD, putting further pressure on Coinbase stock. How things continue to develop in the year ahead is a question of speculation, which leads to uncertainty for the immediate future of Coinbase stock.
Coinbase.com also has a much lower trading volume than its competitor Binance. Meanwhile, more established digital payment providers such as PayPal and trading platforms such as Robinhood also support cryptocurrency trading today. That could put further downward pressure on Coinbase stock if Coinbase’s competitors end up eroding its market share.
Cons of buying Coinbase stock
- Price has struggled since Coinbase’s IPO
- Economic volatility and uncertainty, along with rate hikes, could create downward pressure on share price
- Facing increasing competition from other exchanges and established payment providers
How to buy Coinbase stock
Coinbase stock is available on the NASDAQ, meaning it can be traded on all the major brokerages and investment apps. In most cases, buying Coinbase stock follows a few basic steps:
- Open a taxable brokerage account.
- Fund your account by linking it to your bank. Transfer as much cash to your brokerage account as you want to invest in Coinbase stock.
- Using your brokerage account or investment app, search for Coinbase by name or by ticker (COIN).
- Place an order for your stock. Depending on the brokerage or app, you may have advanced options, such as limit orders and fractional shares.
- Wait for the shares to appear in your account. Depending on the order type and whether the market is currently open, it may take a few days for them to appear.
Once the shares appear in your account, you are all set. In some cases, you may have the option to make recurring investments if that is something that interests you.
If you’re hesitant about buying Coinbase outright, you could buy an exchange-traded fund that includes Coinbase in its holdings, such as Cathie Wood’s ARK Innovation ETF (ARKK).
What is Coinbase’s stock symbol?
Coinbase is traded on the NASDAQ under the stock symbol COIN.
Is Coinbase a dividend stock?
Coinbase stock has not paid any dividends to date. Dividends are cash payments issued to shareholders, usually on a quarterly basis. They typically come from the company’s earnings and are a way to reward investors.
Not paying dividends is normal for a company of Coinbase’s age. At this stage, companies usually reinvest most of their net profit in research and development.
Can you buy stocks on Coinbase?
Currently, you can only buy cryptocurrencies on Coinbase. A complete list of supported cryptocurrencies is available in Coinbase’s asset directory.
Coinbase stock is an interesting alternative for those who want to invest in cryptocurrency without directly buying currencies, such as bitcoin or ether. Coinbase is the largest cryptocurrency exchange in the U.S. (and made our list of the best cryptocurrency exchanges), and it plans to continue expanding globally. This could make it an attractive investment for U.S.-based investors, though Coinbase’s share price has struggled since its 2021 IPO.
Investing in single companies could be risky, and returns are far from guaranteed. If that level of risk doesn’t match your investing style, a smart choice for many investors is investing in broad index funds, such as an S&P; 500 fund or a total-market fund.
These funds allow you to grow your investments over time while reducing your overall risk. Plus, investing can be entirely passive.
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