Coinbase hit $106 billion in value after joining the S&P 500 earlier this year, riding a 69% rally that pushed it to the front of the crypto-to-Wall-Street pipeline.
That run ended hard last week when the stock dropped 17% after its earnings release, the second-biggest post-earnings dip in the company’s history.
Analysts are now asking whether Coinbase can keep charging higher fees without losing ground to cheaper competitors. For years, the company ignored pressure to drop its fees, even increasing them in March for some stablecoin trades. But the game has changed.
Robinhood and Kraken are closing in fast, and Gemini and Bullish are getting ready to go public. “We still see long-term risks to their growth due to above-average retail transaction fees and increasing competition from platforms like Robinhood,” said Alex Woodard, an analyst at Arca.
Robinhood, Kraken, Gemini heat up the competition
Robinhood charges roughly half what Coinbase does, based on estimates from Mizuho. Kraken is expanding beyond crypto by adding stocks and ETFs to keep users inside its app longer.
Meanwhile, Bitcoin has stabilized, and that’s giving users space to think about where they trade and what it costs. All of this is forcing Coinbase into a corner. The company either lowers prices and sacrifices margins or holds prices and loses users.
Brian Armstrong, who co-founded Coinbase in 2012, took it public in 2021. That gave him a head start on most of the industry, as Coinbase became the main place to trade crypto for both retail users and big institutions in the U.S.
On last week’s earnings call, Chief Financial Officer Alesia Haas said part of the trading slowdown was linked to Coinbase’s decision to start charging for stablecoin trading pairs, a segment that had mostly been free.
“This was in our control,” Alesia told shareholders. “When you exclude the impact of lower stable-pair volume, our total trading volume was more similar to the overall spot markets.”
Coinbase framed the move as a tradeoff, betting on margin instead of user growth. A company spokesperson allegedly told Bloomberg in an email, “As more players enter crypto, it’s a sign the space is going mainstream. That’s good for the ecosystem, but we’re here to win.” Whether that win comes with fewer users or not is the big question.
Coinbase leans on expansion plans
Coinbase isn’t sitting still. It’s planning to offer stock trading and expand its custody services, which already serve institutional products like Bitcoin ETFs. It bought Deribit and added perpetual-style futures contracts for U.S. users. It wants to become the “everything exchange,” with plans to include prediction markets next.
It still has over $9 billion in cash and revenue coming in from its partnership with stablecoin issuer Circle Internet Group. But a big part of its business still relies on people trading crypto. Dan Dolev, an analyst at Mizuho, said that full dependency on trading is dangerous. He explained, “Either way, being so fully dependent on crypto trading is risky.”
But again, competition is turning up the heat. OKX is back in the U.S. market. Binance, even with its legal troubles, was reportedly talking to World Liberty Financial, a crypto venture owned by the Trump family.
Despite the pressure, Coinbase still trades at about 44 times forward earnings. That’s higher than old-school exchanges but lower than Robinhood’s 65. It’s nowhere near Circle’s multiple. But even that premium is in danger. H.C. Wainwright downgraded the stock in July, warning that the competitive squeeze could impact its valuation.
Oppenheimer’s Owen Lau is still optimistic. He expects a 46% revenue rebound in the third quarter. “I don’t think COIN’s valuation is out of reach,” Lau said. “It is trading at a big discount compared to HOOD and CRCL. I think if they can continue to grow both top and bottom line, it will help.”
Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.