Coinbase

Cryptocurrency markets had a poor start to 2026, and falling valuations drove Coinbase back into unprofitability in the first half of 2026. However, as cryptocurrency markets have partially recovered, the firm's prospects have improved in recent months.

The bottom line: We are increasing our fair value estimate for no-moat-rated Coinbase to $168 from $150. Despite the increase, we still see the shares as overvalued, as we think they have rallied too far on rising cryptocurrency prices. Around $5 of the increase comes from the time value of money since our last model update. The other $13 comes from higher cryptocurrency trading and custody revenue projections as we incorporate higher cryptocurrency valuations into our model. While Coinbase has made tangible progress in its efforts to reduce its exposure to cryptocurrency market conditions, the company's results are still highly correlated to cryptocurrency prices, which are inherently volatile.

Key stats: We now expect Coinbase to be profitable in the second half of 2026, with our 2026 projections implying diluted earnings per share of $2.18 over the next six months. This will still depend heavily on the path cryptocurrency prices take. Coinbase maintains significant cryptocurrency investments and treats its unrealized gains and losses as part of its operating results, adding further exposure.

Bulls say: Coinbase's new strategy of becoming an "everything exchange" will reduce the firm's reliance on the price performance of a single highly speculative asset class and drive revenue growth by better monetizing its users' demand for speculative products.

We are increasing our fair value estimate to $168 from $150, which translates to a 2026 enterprise value/sales ratio of 6.18 times. Around $5 of the increase in our fair value estimate comes from the time value of money. The rest of the increase comes from higher cryptocurrency trading revenue projections as cryptocurrency markets have made a partial recovery since our last update.

Our fair value estimate depends heavily on trading volume assumptions, the rate at which we expect Coinbase's trading fees to compress over time, and interest income projections from Coinbase's partnership with Circle for the stablecoin USDC.

Coinbase's largest source of revenue is trading fees, which are assessed as a percentage of the amount being traded on its platform. This ties its long-term revenue growth to the size of the overall cryptocurrency asset class, as well as its market share. Cryptocurrency is still a speculative asset class, and the number of available cryptocurrencies to trade, the space's eventual market capitalizations, and even its continued existence are still major unknowns.

Our model projects that the cryptocurrency market will reach a total market capitalization of just under $8.18 trillion by the end of 2035. We also anticipate that Coinbase will see some fee compression. Coinbase has been able to charge a premium fee rate due to the strength of its reputation and compliance record—major advantages in a market fraught with risk and regulatory uncertainty. As cryptocurrencies become more normalized, Coinbase will almost certainly see more competition targeting its niche, and the value of its security premium fades over time, though an increase in trading volume should allow the company to continue to enjoy robust trading revenue growth regardless.

Coinbase's second-largest source of revenue is interest income through its partnership with circle on the issuance of the stablecoin USDC. USDC is a cryptocurrency pegged to the US dollar and backed by reserves that clients give to Coinbase and Circle in exchange for USDC. Coinbase and Circle generate interest income on these reserves and split it based on their partnership agreements. Our model assumes that Coinbase's stablecoin revenue increases at a compound annual growth rate of 18.8% from 2025 to 2035, though this revenue stream is highly exposed to interest rates. If interest rates fall, Coinbase's stablecoin revenue could even fall despite asset growth.

Coinbase currently receives the majority of its revenue from its transaction fees and interest. While we do expect its nontransactional business lines to grow over time, we expect Coinbase to remain reliant on transactional revenue, with around 50% of its revenue coming from recurring sources at the end of the next 10 years. We expect the company's operating margins to be in the low 40s by 2035, placing it well below traditional exchanges, due to its higher marketing and service spending requirements.

In our view, Coinbase does not have an economic moat despite being the leading cryptocurrency exchange in the United States. While Coinbase still has an advantage in terms of the number of cryptocurrencies listed and the breadth of services offered, it is seeing growing competition from firms not native to the cryptocurrency industry, such as Robinhood. Coinbase will likely be able to continue to charge a premium for the immediate future, but we do expect fee compression to occur over time as regulatory clarity in the US facilitates more competitors entering the market.

Moreover, Coinbase is inherently reliant on the growth and success of bitcoin, ethereum, and other cryptocurrencies for generating returns on its invested capital. Cryptocurrency is still highly speculative, and the long-term success and viability is by no means guaranteed. Speculation on future price appreciation remains a key part of the space's appeal, creating further uncertainty about the long-term value and longevity of current prices. Coinbase has built a strong competitive position for itself, but without more confidence in the long-term viability of cryptocurrency as an asset class, there is too much potential for Coinbase's returns on invested capital to rapidly evaporate for us to award the company a moat. There is no structural supply or demand dynamic in cryptocurrency that can be relied on to drive a cyclical recovery in the firm’s business. A perpetual cryptocurrency “winter” is possible and would lead to permanent decline in trading revenue.

Inside of an industry where regulatory enforcement can be spotty and a number of high-profile failures have led to significant losses, Coinbase has consciously positioned itself as a safe exchange. The company is registered in the United States and its decision to become publicly listed follows this strategy. While there have been real costs associated with Coinbase's compliance with US and other nation's regulatory regimes, the firm has benefited from the strategy it has chosen, and the costs can be seen as an investment in building a brand intangible asset. Coinbase is well known as a safe exchange for experienced traders and newcomers alike.

The value of this brand reputation is significant when considered in the context of the severe risk cryptocurrency traders face when it comes to exchange hacks and other security issues. Because the exchanges act as custodians they are prime targets for theft and the track record of the industry as a custodian of assets is poor, with billions in client assets lost to theft since 2014. Well-established exchanges have developed security procedures and have had success in limiting (but not eliminating) losses. Larger exchanges with strong balance sheets are also often capable of using their own financial reserves to cover their client's losses when a theft occurs. This creates a clear incentive for traders to stick with established exchanges with significant financial reserves over small startups.

However, the shift in the regulatory environment in the US, Coinbase’s core market, will likely erode this advantage over time. With the new administration, regulators in the US have become far more welcoming to cryptocurrency, encouraging existing financial institutions to either enter the market or expand their cryptocurrency offerings. Coinbase’s brand advantage versus more established rivals will likely be limited and there is material risk that Coinbase’s ability to command premium pricing for its trading fees will erode over time.

Outside of Coinbase’s core cryptocurrency trading business, we do think that its stablecoin segment has a stronger long-term competitive position. Stablecoins are cryptocurrency tokens designed to have their value pegged to an existing fiat currency or asset in order to make them more suitable as a payment vehicle. Stablecoins are created when users send funds to a stablecoin issuer in exchange for an equivalent amount of stablecoins. The issuer then generates revenue from interest income on these funds, which are held in reserve to maintain the peg.

While Coinbase is not a stablecoin issuer itself, it does have a lucrative partnership agreement with Circle, the issuer of the second largest stablecoin, USDC. Coinbase receives a significant portion of the interest income from USDC in exchange for its help in distributing and marketing the stablecoin. As long as Coinbase fulfills its obligations, Circle does not have the ability to unilaterally end the contract, giving Coinbase a reliable source of revenue. However, we do not think that Coinbase’s stablecoin business alone can support a moat rating for the whole firm. First off, Coinbase’s stablecoin business only provided it with 18% of revenue in 2025 which is insufficient to give the firm a moat, though we expect this to reach 28% by 2035. Second, while stablecoins provide Coinbase with a steady source of revenue, the business is still exposed to capital markets and carries significant potential for volatility. Stablecoin revenue comes entirely from interest income on short-term securities. If interest rates fall significantly, Coinbase’s stablecoin revenue could collapse.

We believe that Coinbase has established a good competitive position. However, the long-term longevity of the industry as a whole is not guaranteed, and we expect Coinbase to face growing pricing pressure and increased competition from more reputable. There remain significant underlying risks that interest in cryptocurrencies could deteriorate further, leading to a significant contraction in Coinbase’s underlying market size. While we like Coinbase’s new strategy of broadening out into new asset classes like prediction markets, these efforts are in their nascent stages, and it is far too soon to assess their contribution to a potential moat. In our view, the risk of a material decay in the company's position is too great to award it a moat.

Coinbase's vision to become an "everything exchange" could prove to be more succesful than expected, driving faster revenue growth from new trading products.

Increased adoption of stablecoins could drive significant growth for Coinbase's USDC revenue.

There is a global market for cryptocurrency. Regulatory approval from international regulators could allow Coinbase to expand its operations and increase its footprint globally.

Cryptocurrency markets have historically been deeply cyclical, with long periods of low prices and depressed trading volume. Persistent cryptocurrency weakness could put significant pressure on Coinbase.

A more favorable regulatory environment for cryptocurrency could lead to more competition for Coinbase's core US market.

Coinbase's stablecoin revenue is dependent on interest rates, falling interest rates could lead to lower stable coin revenue.