Lisa Ellis of MoffettNathanson on Coinbase

The “Google of crypto economy»And Netscape 2.0. are just two of many powerful analogies that Coinbase’s Initial Public Offering (IPO) got when it debuted on April 14 with a closing price of $ 328.28 and $ 85.8 billion. market capitalization. It’s been a bit of a roller coaster ride ever since. A week ago today, Coinbase opened at $ 337 a share. It ended the week at $ 294, following a sharp drop in the price of bitcoin.

It’s a stock – and a roller coaster ride that Lisa Ellis, partner and senior equity analyst at MoffettNathanson LLC followed closely. As a recognized expert in broad payments and crypto in particular, Ellis has been selective about his investments in the space, but is bullish on Coinbase. She told PYMNTS CEO Karen Webster that she sees Coinbase as enabling crypto as a technology and, as such, is an important gateway to the crypto economy as a whole.

His target price: $ 600.

“We are very transparent with Coinbase,” she told Webster. “[Coinbase] is not for the faint of heart. It really is a title that we see as a long-term holder of the technology. You just need to have a strong stomach.

A strong stomach and a good head for the fundamentals of crypto as a technology. For now, however, its shares rise and fall depending on the crypto, the speculative asset. This is where both the debate over its long-term value lies and the evolution of crypto as a technology.

“Cryptocurrencies – as a technology – have a number of use cases that have emerged over the past five or six years, encompassing everything from asset identification and tracking to decentralized finance and collateral for loans through bitcoin as a form of ‘gold 2.0’, ” she mentioned. “I think about [Coinbase] like on the way to becoming like Microsoft Azure for blockchain technologies. »Give a nod to the creation, testing, launch and management of applications and services through the use of data centers managed by Microsoft.

Existential question of Cryptos: currency or speculative asset

Ellis’ Azure comparison aside, there is still some debate about crypto as a currency or as a technology, especially when it comes to big name names like Bitcoin. Coinbase’s current business model makes money on buying and selling speculative assets, including bitcoin which has a market cap of around half (or more depending on the day) of all other altcoins. Cryptocurrency, Webster said, is either a currency or a speculative asset – currencies cannot be both, especially considering that its fluctuations in value can reach $ 260 billion in one. single day like what happened on Friday (April 23). If currency values ​​stabilize, investors will stop trading. If they don’t, it seems difficult to fix volatile cryptos as the currency people will use as part of their daily spending.

“I would say people don’t think Bitcoin works in both of these roles,” Ellis argued, “in the same way that gold doesn’t work in both of these roles. For now, and for a long time in the rearview mirror, bitcoin has been the most oriented version of blockchain and crypto technology, and specifically designed, to be a store of value, with a fixed supply. (There are 21 million that are available for mining).

On the other hand, she said, there are blockchains with design parameters that test cryptocurrency technology as a payment method – notably, alternatives to fiat in countries where traditional values ​​of cash and in pieces are unstable.

For Coinbase, the triggers that will be growth-friendly factors that ultimately justify the price target relate to the core brokerage business – where individuals want to keep crypto in their wallets and will need the Coinbase ramp to do so. The platform will help software developers and other players in banking and merchant operations build applications around different blockchains.

As she told Webster, “Cryptocurrency technology isn’t just one thing, it’s like six or seven things now. And over time we’ll probably see 20 or 30 different technologies, ”indicating what could be a solid prospect for Coinbase.

The infrastructure game

Coinbase, she said, has built the infrastructure to make these technologies usable – most importantly, by a larger developer ecosystem linked to app developers, who can, in turn, provide the tailwind for more. new cases. When it comes to building a moat, Coinbase, she argued, has strong crypto technology, strict regulatory compliance and licensing, and a strong consumer name.

“Having a well-known brand,” she said, “is unique among crypto companies.”

That said, there are competitive threats. Today, three pillars have helped Coinbase build and maintain its moat: licensing, consumers and a consumer brand, and its exchange. Traditional brokerage houses or even some large tech companies either do not have a license in place or may find a regulatory hurdle daunting. But the acquisition of a Kraken or Gemini by a brokerage with a large consumer base could threaten Coinbase’s dominance by competing on price and diversity of income streams.

At the same time, Ellis said, Coinbase could potentially take a different competitive approach, striving to become the “Coinbase Inside” enabling brokerage and exchange capabilities for other companies. This would involve working with existing brokerage houses and connecting to their offering, rather than individual brokerage houses partnering or acquiring other businesses to have their own capabilities.

For now, the story of its beginnings and of Coinbase as a platform for the crypto-economy is still being written. For any investor, including Ellis, the long-term proof will be in the apps generated by Coinbase, the platform.

“I think you really have to see this platform business start to take off,” she said. “This will give us confidence in the long-term valuation of Coinbase.”



About the study: A third of consumers who signed up for subscription services in the past year were just there for the free trial. In the 2021 Subscription Commerce Conversion Index, PYMNTS surveys 2,022 U.S. consumers and analyzes more than 200 subscription commerce providers to focus on the key features that turn ‘subscription curious’ into persistent, long-term subscribers. term.

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