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How Coinbase could become more than just a cryptocurrency exchange
Coinbase (CURRENCY) has received a license to provide virtual asset services in France, which means it can operate crypto services in the country. Needham and the company’s senior analyst John Todaro joined Yahoo Finance to discuss Coinbase’s overseas growth strategy and continued hopes for a Bitcoin ETF (BTC-USD) in the United States.
According to Todaro, the “lack of regulatory clarity in the United States” pushed Coinbase to focus on international opportunities. However, he attributes the rise in Coinbase shares to the performance of cryptocurrencies in recent weeks and the expectation that a spot Bitcoin ETF will be approved.
For more transformative growth, Todaro believes Coinbase must move beyond “just trading” to provide more cryptocurrency use cases, such as developing blockchain tools that can expand Coinbase’s central role in the cryptocurrency economy beyond exchange services.
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Video transcription
SEANA SMITH: –getting regulatory approval this week in France, pushing deeper into the European market. Now, the news comes amidst the excitement around crypto assets. We have definitely seen a rally in Bitcoin prices. In the last month alone, you’re looking at gains of around 16%.
Much of this excitement is due to the potential approval of a spot Bitcoin ETF, the first one that could hit the market here in 2024. We want to get John Todaro involved, he’s the senior analyst at Needham and Company. John, it’s great to have you here.
Let’s start first with the news we published this week about 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 in just the last week. Over the past five days, the stock has risen about 17.5%. How important is this milestone for Coinbase’s international growth strategy?
JOHN TODARO: Sure. I think it’s a strategy that almost has to do with the lack of regulatory clarity in the United States. We saw Robinhood make a similar push when they opened in Europe. They offer more cryptocurrencies for trading here than in the US. So it certainly makes sense for Coinbase to make this push.
I would say a lot of the stock movement was simply the underlying performance of cryptocurrencies, the expectation of a Bitcoin ETF going down because miners also went up quite a bit last week. So it’s not just related to Coinbase and its international push. But this opens up new growth strategies for them. And they plan to push more internationally in 2024 and beyond, especially until we have a little more regulatory clarity here in the United States.
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BRAD SMITH: John, you got some calls this morning comparing Coinbase to maybe the Amazon of cryptocurrencies. Ultimately, what is going to be the driving force that gets consumers to look at this company and say this is something I need to have on my phone, this is so, in a way, integral to cryptocurrency? in their daily lives where Coinbase is perhaps at the center of it all?
JOHN TODARO: Yes, I think the key is for cryptocurrencies or Coinbase to become more than just a cryptocurrency exchange broker. So what it needs to do is, in your opinion, have a lot more use cases within cryptocurrencies than just trading. And one way to do this is your own blockchain.
The basic chain is their blockchain, which they launched. This could become an integral part of many aspects of the crypto ecosystem. It could support gaming applications, support other commercial products.
So there’s a lot of things they can do with that. And this is where users could even transact on one of Coinbase’s blockchains and not even know it. So if that’s the case, Coinbase could become this hub for a lot of activity within cryptocurrencies, less just, hey, here’s this retail platform to buy and sell Bitcoin on.
SEANA SMITH: John, in terms of how investors, how advisors think about Bitcoin, think about cryptocurrencies, you recently conducted a survey. You’ve talked to advisors, individual investors who were just trying to determine or gauge, I guess, the perception of a potential spot Bitcoin ETF, whether or not that approval is going to be a catalyst for the price movement that we might see in cryptocurrencies. What did you find?
JOHN TODARO: Yes, so right now there’s still a lot of disinterest in Bitcoin and a Bitcoin ETF. We found that only 11% of people who have not bought Bitcoin in the past said they would be likely or very likely to buy a Bitcoin ETF. So we think it’s still pretty early right now, even though there’s been a lot of talk about a Bitcoin ETF. The average investor is not there ready to go the moment a Bitcoin ETF launches.
So, the most important point is that we think it’s the start of the innings. We think that if Bitcoin breaks 50,000 or more, excitement will start to return to the space. Then you have this Bitcoin ETF product and capital could flow.
And then the second point is that advisors are where we think the majority of the capital is going to come from. You may find that some individuals are enthusiastic about it. But keep in mind that there are many avenues for people to purchase Bitcoin today.
They can go to Coinbase, they can go to Robinhood, they can go to decentralized exchanges. So there are many avenues for those folks where we think new capital would come from advisors. And so the survey found a little more positive things about advisors getting capital allocated to the Bitcoin ETF, but we also found that advisors mostly had disinterest in their clients.