February 23, 2024

How Coinbase could become more than a crypto exchange

Coinbase (COIN) received a virtual asset service provide license in France, meaning it can operate crypto services in the country. Needham and Company Senior Analyst John Todaro joined Yahoo Finance to discuss Coinbase’s overseas growth strategy and continued hopes for a Bitcoin ETF (BTC-USD) stateside.

In Todaro’s view, the “lack of regulatory clarity in the US” has pushed Coinbase to target international opportunities. However, he attributes the rise in Coinbase’s stock to how well crypto has performed the last several weeks and the expectation that a spot bitcoin ETF will be approved.

For more transformational growth, Todaro believes Coinbase needs to move beyond “just trading” to provide more crypto use cases, such as developing blockchain tools that can broaden Coinbase’s central role in the crypto economy beyond exchange services.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: –getting regulatory approval this week in France, pushing deeper into the European market. Now, the news coming amid excitement surrounding crypto assets. We have certainly seen a rally in Bitcoin prices. In just the last month alone, you’re looking at gains of about 16%.

A lot of this excitement due to a potential approval of a Bitcoin spot ETF, the first one that could be coming to market here in 2024. We want to bring in John Todaro, he is Needham and Company’s senior analyst. John, it’s great to have you here.

Let’s first start with the news that we got out this week of Coinbase. Because when you take a look at that chart, we’re looking at gains here at the open, we’re looking at pretty significant gains over the last week alone. Over the last five days, the stock up just about 17.5%. How big of a milestone is this for Coinbase’s international growth strategy?

JOHN TODARO: Sure. I think it’s a strategy that they almost had to do with the lack of regulatory clarity in the US. We saw Robinhood do a similar push where they opened up in Europe. They offer more crypto assets there for trading than in the US. So it certainly makes sense for Coinbase to do that push.

I would say a big part of the stock move though has just been the underlying performance of crypto assets, the expectation of a Bitcoin ETF coming down because the miners are up quite a bit as well this past week. So it’s not just related to Coinbase and their international push. But this does open up new growth strategies for them. And they do plan to push more internationally in 2024 and beyond, especially until we get a little bit more regulatory clarity here in the States.

BRAD SMITH: John, you got some calls out this morning comparing Coinbase to perhaps the Amazon of crypto. At the end of the day, what is going to be the driving force that has consumers look at this company and say ultimately that this is something that I need to have on my phone, that it is so, kind of, integral in crypto to their everyday lives that Coinbase sits at perhaps the hub of that?

JOHN TODARO: Yeah, I think the key to that is crypto– or Coinbase becoming more than just a crypto exchange brokerage. So what it needs to do is become, to your point, have a lot more use cases within crypto besides just trading. And one way they can do that is their own blockchain.

Base chain is their own blockchain, which they’ve launched. That could become very integral to a lot of aspects of the crypto ecosystem. It could underpin gaming applications, underpin other trading products.

So there’s a lot of things that they can do with that. And that’s where users might even be transacting on one of the Coinbase blockchain and not even know it. So in that case, Coinbase could become this hub for a lot of activity within crypto, less so just kind of, hey, here’s this retail platform to go buy and sell Bitcoin on.

SEANA SMITH: John, when it comes to how investors, how advisors are thinking about Bitcoin, are thinking about crypto, you recently did a survey. You spoke with advisors, individual investors just trying to determine or gauge, I guess, the perception of a potential spot Bitcoin ETF, whether or not that approval is going to really be a catalyst here for the price movement that we could see in crypto. What did you find?

JOHN TODARO: Yeah, so one right now, there’s a lot of disinterest still in Bitcoin and a Bitcoin ETF. We found that only 11% of individuals who haven’t bought Bitcoin in the past said they would be likely or very likely to buy into a Bitcoin ETF. So we do think right now it’s still pretty early innings even though there’s been a lot of talk about a Bitcoin ETF. Your average investor, they’re not sitting there ready to go the moment a Bitcoin ETF is launched.

So one, the big takeaway from that is we do think it’s early innings. We think if Bitcoin gets above 50k or higher, that starts to get the excitement back in the space. Then you have this Bitcoin ETF product and capital might flow in.

And then the second point is that the advisors is where we think the capital will mostly come in. You might have some individuals get excited about it. But keep in mind, there’s a lot of avenues that exist today for individuals to buy Bitcoin.

They can go to Coinbase, they can go to Robinhood, they can go to decentralized exchanges. So there’s a lot of avenues for those folks where we think the new capital would come in from advisors. And so the survey did find a little bit more positive aspects about advisors getting capital allocated to Bitcoin ETF, but even that we found that advisors mostly have had disinterest from their client.

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