Differences between Investing vs Trading
Differences between Investing vs Trading
Coinbase is one of the world’s leading cryptocurrency exchanges. Its parent company, Coinbase Global, Inc., was established in June 2012, with the remit of creating a centralised portal for individuals to buy, sell and store cryptocurrency. It’s long been the most popular cryptocurrency exchange in the US by trading volumes. However, it’s not been immune from the volatility in the crypto markets, with the company laying off almost a fifth of its workforce in the summer of 2022 due to the unprecedented crypto downturn.
They broker exchanges of Bitcoin, Ethereum, Litecoin and other digital assets with fiat currencies in 32 countries, and bitcoin transactions and storage in 190 countries worldwide. Coinbase has masterminded a string of crypto-focused products, including the creation of the USD Coin – a stablecoin, allowing users to deposit fiat US dollars in exchange for USD Coin that’s pegged to the value of fiat US dollars.
Founded: June 2012, San Francisco, California, USA
Founders: Brian Armstrong and Fred Ehrsam
Headquarters: Fully remote company
The history of the Coinbase share price is somewhat brief. That’s because Coinbase only opted to become a publicly listed company in April 2021. Coinbase launched a direct stock listing on the US100 exchange, with the price of Coinbase shares reaching highs of $328 per share after the first day of trading.
The Coinbase share price then seemed to fall and stabilise around $225 per share, before peaking at an all-time high of $342 per share in November 2021. It’s been one-way traffic downwards ever since, with the bearish cryptocurrency markets causing Coinbase shares to plummet to just $58 per share by July 2022.
Did you know? You can trade the fluctuations of the Coinbase share price without having to physically purchase shares in the popular cryptocurrency exchange. With contract for difference (CFD) trading, you can speculate on the Coinbase share price, giving you the ability to profit on falling prices as well as rising prices too. That’s because CFDs at Skilling allow you to short (sell) the price and profit if the price of Coinbase shares continue to fall below your entry point.
CFD trading on stocks like Coinbase also offer leverage. This means you only need to deposit a fraction of the total value of your trade to obtain full market exposure. If you were to physically buy Coinbase shares you’d need to pay for them upfront in full.
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* The spreads provided are a reflection of the time-weighted average. Though Skilling attempts to provide competitive spreads during all trading hours, clients should note that these may vary and are susceptible to underlying market conditions. The above is provided for indicative purposes only. Clients are advised to check important news announcements on our Economic Calendar, which may result in the widening of spreads, amongst other instances.
The above spreads are applicable under normal trading conditions. Skilling has the right to amend the above spreads according to market conditions as per the 'Terms and Conditions'.
Are Coinbase shares a good investment?
There's no easy answer to this question - it depends on a number of factors, including your investment goals and risk tolerance. However, if you're looking for a potential high-growth investment, Coinbase shares could be worth considering. Coinbase is one of the leading cryptocurrency exchanges, and its user base has grown significantly in recent years. If demand for cryptocurrencies continues to increase, Coinbase could see strong growth in the future.
Of course, there are also risks to investing in Coinbase shares. Cryptocurrencies are still a relatively new and volatile asset class, so there's always the potential for sharp price swings. And as a regulated company, Coinbase is subject to changing regulations that could impact its business. So, ultimately, whether or not Coinbase shares are a good investment for you depends on your individual circumstances and investment goals. If you're willing to stomach the risks, they could be worth considering. However, if you're looking for a more stable investment, there may be better options out there.
Who owns most Coinbase shares?
The largest shareholder of Coinbase is its CEO, Brian Armstrong, who owns about 25% of the company. Other major shareholders include Andreesen Horowitz (15%), Union Square Ventures (10%), and Ribbit Capital (8%). Coinbase's shareholders are mostly made up of venture capitalists and early investors in the company. However, some retail investors have also bought shares in the company through private placements.
Do Coinbase shares pay dividends?
No, Coinbase does not pay dividends on its shares. However, the company has been growing rapidly and is expected to generate significant profits in the future. As such, shareholders may benefit from capital appreciation of their shares over time. Coinbase may also issue special dividends or share repurchases in the future if its board of directors deems it to be in the best interests of the company and its shareholders.
Trading Coinbase in 2023
Crypto exchange Coinbase struggled throughout 2022. The crypto bear market and FTX collapse saw trading volumes dwindle, hurting Coinbase revenues. Can the firm recover in 2023?
In mid-April 2023, the Coinbase share price is up by 88% YTD. How much further could the rally extend?
Positioning and flows are likely to play a major role. Along with memestocks such as AMC & Gamestop, the share price has been impacted by some monumental short squeezes.
If crypto rises in value, will Coinbase benefit?
Theoretically yes. The coinbase business model is similar to almost every exchange/broker. Charge fees for providing trading services. Most fees are a percentage of the value of the underlying asset or transaction.
However, overall trading volumes are an important revenue driver. More participants (more overall trades) means more transactions to charge commissions for. The value of those securities is secondary.
Is Coinbase the dominant crypto exchange?
Not according to Morgan Stanley. Their analysis found that Binance dominated BTC trading on exchanges.
Binance cut BTC trading fees to zero in July last year and has continuously been gaining market share. 81% of BTC traded on exchanges in February was traded on only one exchange, Binance.
Our conclusion is that traders on Binance now set the daily price for BTC. Investors mostly ask us about Coinbase as that is the largest listed crypto stock, but we would argue that the flows on Binance should be more closely monitored to understand what is going on in the markets.
For context,after bitcoin rallied 40% in January, the volume of BTC/USDT traded on Binance reached 38x that of the equivalent pair on Coinbase relative to being only 4x in early 2022.
Is Coinbase profitable?
No. In the fourth quarter of 2022, Coinbase reported operating income of negative $555 million, the fourth consecutive quarterly loss. Despite the lack of profitability, stock-based compensation doubled in 2022 vs 2021.
In 2022, Coinbase paid out almost $1.6 billion in stock-based compensation.
Coinbase’s second largest source of revenue in 2022 was interest income of $327 million. COIN doesn’t pay interest on deposits. By depositing their own cash and that of customers into high quality liquid assets such as US treasury bills, the broker can earn passively.
Can the SEC close down Coinbase?
COIN is not a registered exchange. SEC registration as a public company does not circumvent the law. Coinbase is operating as an unregistered securities exchange while the SEC & CFTC argue about the definition of crypto assets as securities or commodities.
Regulators could decide to shut down Coinbase, or impose sanctions and restrictions on the business at any time.
Is Coinbase overvalued?
Based on an average of Wall Street analyst coverage, Coinbase is fairly valued at approximately $70 per share. However, there’s a huge range, with a price target of $200 per share on the high side and $30 per share on the low side.
However, analyst estimates don’t see Coinbase turning a profit in 2023 or 2024. If trading volumes don’t increase the business increasingly relies on other revenue streams to maintain operations.
Why Trade [[data.name]]
Make the most of price fluctuations - no matter what direction the price swings and without capital restrictions that come with buying the underlying asset.