’Our View on Coinbase Is Still Negative, Says Mizuho Analyst Dan Dolev


’Our View on Coinbase Is Still Negative, Says Mizuho Analyst Dan Dolev

  cryptoglobe.com 29 July 2024 19:20, UTC

On July 29, Dan Dolev, a senior analyst at Mizuho, joined CNBC’s “The Exchange” to share his perspectives on the evolving crypto market and the potential implications of Coinbase being included in the S&P 500.

Dolev began by acknowledging the increasing mainstream integration of cryptocurrencies. He noted that the broader financial system is gradually absorbing crypto assets, which is evident from the political interest they are garnering. This mainstream acceptance, however, doesn’t necessarily translate to a bullish outlook for all crypto-related companies, particularly Coinbase.

Despite the growing interest in cryptocurrencies, Dolev maintained a bearish stance on Coinbase. He highlighted several critical factors contributing to this view:

  1. Revenue Dependence on Bitcoin: “Only about 20% of Coinbase’s revenue is derived from Bitcoin transactions,” Dolev pointed out. The remaining revenue comes from other sources that aren’t performing as well, which poses a risk to the company’s overall financial health.
  2. Declining Take Rates: Dolev predicted that take rates, the fees Coinbase charges for transactions, would eventually decline. “Take rates are eventually going to come down,” he emphasized, indicating that this decline could further strain Coinbase’s revenue, especially as competition intensifies.
  3. ETFs Impact: The successful launch of Bitcoin ETFs has drawn significant assets, but Coinbase earns thinner margins on ETFs compared to spot trading. “Coinbase makes a lot less money on the ETFs than they make on spot,” Dolev explained. As ETFs become more popular, Coinbase’s high-revenue spot trading might diminish, leading to reduced profitability.

Dolev pointed out that while Coinbase has been the go-to platform for institutional investors, it is losing market share. “Their percent of global crypto volumes in their categories is actually down in July versus the last few months,” he noted. For example, platforms like Robinhood are capturing a growing slice of the global crypto trading volume. This trend indicates that Coinbase’s dominance could be challenged as more public crypto exchanges emerge, offering investors multiple alternatives. Dolev further elaborated, “There’s no scarcity in an exchange trading Bitcoin,” highlighting that competition will only increase as new players enter the market.

The discussion also touched upon the political risks associated with cryptocurrencies. Dolev argued that political interventions, such as the idea of a Bitcoin strategic reserve proposed by political figures, add uncertainty and risk to the crypto market. “I actually think that the Trump thing actually hurts crypto and hurts Bitcoin because now you’re adding political risk,” he asserted. He stressed that disassociating Bitcoin and Coinbase from political debates would be beneficial for their stability and growth.

Shifting focus to fintech, Dolev expressed optimism about the BNPL sector. He specifically mentioned companies like Affirm and Sofi:

  1. Affirm: Dolev argued that the current economic environment is highly favorable for BNPL platforms like Affirm. “There’s no better time in investing in buy now, pay later than right now,” he stated. With interest rates potentially coming down, Affirm’s profitability could soar due to lower borrowing costs. “Affirm has already proven to you that they’re earning a lot of money and they can actually be profitable,” he noted. He added that Affirm has mastered underwriting, making it a robust player in the market.
  2. Sofi: Similar to Affirm, Sofi is well-positioned to capitalize on the BNPL trend. Dolev’s research indicated that Sofi could unleash significant growth in personal loans if delinquencies decrease and interest rates drop. “We’ve done work that shows that they can unleash 30% growth in personal loans this year if they wanted to,” he highlighted. This potential for growth makes Sofi an attractive investment.

At the time of writing, Bitcoin is trading at $67,404, down 1.2% in the past 24-hour period. As for Coinbase stock, the shares are currently trading at around $236.54, down 2.63% on the day.

Featured Image via Coinbase

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top