What happened
Shares of cryptocurrency exchange Coinbase Global (NASDAQ:COIN) hit an all-time high at more than $400 per share the first day the company was public. The stock fell shortly thereafter and hasn’t done much since. However, shares are up roughly 10% over the past week and 3.6% higher today as of 10:45 a.m. EDT, as it’s becoming more apparent that trading volume for cryptocurrencies is holding strong.
So what
As my Motley Fool colleague Rick Munarriz so eloquently said, “Coinbase is a bet on crypto trading — and not necessarily its ascent.” In other words, Coinbase generates most of its highly profitable revenue from trading volume. It doesn’t necessarily matter if the prices of cryptocurrencies go up or down as long as its 68 million verified users are buying and selling.
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Coinbase’s second-quarter trading volume reached an all-time high, and it’s unlikely to be topped in the third quarter. However, there’s growing evidence that trading volume isn’t dropping off as much as investors previously feared, which is good for Coinbase.
Moreover, the company continues to add support for trading more and more altcoins, and it even announced that it’s launching a marketplace for non-fungible tokens (NFTs) this year. The NFT waiting list has already signed up over 1 million people in just a couple of days.
By constantly adding more things to trade, Coinbase is increasing its chances of maintaining strong trading volume in the quarters to come.
Now what
Coinbase is expected to report third-quarter financial metrics within the next few weeks. The only insight management gave was that July trading volume fell from the second quarter. And while August was rebounding compared to July, it was still lower than second-quarter volume as well. Because of this, management believes trading volume will be down for the quarter.
Additionally, because there’s a cost to adding altcoins and NFTs to the Coinbase platform, it’s possible that expenses will be relatively higher for the quarter.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.