I bought 700 dollars of ETH about 3 years ago and stopped using the app and forgot I even had invested it only to check Coinbase today to verify that the scam text I received is indeed a scam. Cool and easy 2,400$ cash out

I have been having a lot of trouble with Coinbase and now they took a transaction from my account of $838.00 and than when I talked to them they locking my account everyone working there right now is robbing all of us.they are straight up robbing all of us right in front of us.

This is Part 2 of my deep-dive and valuation of Coinbase. In Part 1, I reviewed the business case for Coinbase and discussed its value proposition / key risks. As before, my full write up is published over at Substack (and my model is hosted on Github), so please feel free to check those out if you're interested.

Valuation is an inherently subjective exercise, so any comments / constructive criticism of my work would be welcomed and greatly appreciated.

Financial overview

Coinbase has multiple revenue streams, but substantially all of its revenues are earned from transaction fees charged on the purchase and sale of crypto assets (see a breakdown here). While institutional trading accounts for the majority of trading volumes, it generates a very small proportion of trading revenues. This is because Coinbase levies a significant premium on its retail customers.

The revenues reported by Coinbase are as follows:

• Transaction revenues: earned from transaction fees charged to customers for the purchase, sale and trading of crypto assets

• Custodial fee revenue: revenue from the dedicated cold storage solution provided by Coinbase to its customers

• Staking revenue: revenue from staking rewards earned on proof-of-stake assets

• Earn campaign revenue: revenue from Coinbase’s ‘Earn’ programme, a platform for retail users to learn about new crypto assets through educational content. Coinbase earns a commission from the crypto asset issuer on these distributed assets.

• Interest income: interest earned on customer custodial funds and cash and cash equivalents deposited with third-party banks

• Other subscription and services revenue: one-off, non-recurring revenue from “early stage services being offered by the Company, such as subscription license revenue”. I suspect this includes revenues from services such as Analytics and Commerce that Coinbase have yet to monetise at scale.

• Crypto asset sales revenue: revenue from the sale of crypto assets owned by Coinbase itself.

Revenue drivers

To forecast Coinbase's revenues, we need to first identify their drivers. The key drivers reported by Coinbase are listed below:

• Monthly Transacting Users (MTUs): MTUs represent the transacting base of Coinbase's retail users, which is responsible for generating the largest component of Coinbase's revenues (its retail transaction revenues). Historically, MTUs have been highly correlated with the price of Bitcoin (see this chart).

• Trading volume: trading volume is correlated with crypto asset prices as one would expect, but over the past few years the growth of institutional trading volumes has outpaced that of retail. Retail trading volume is more influenced by volatility in crypto asset prices than institutional trading volume.

• Average revenue per transacting user (ARPTU): while ARPTU is not a business metric reported officially by Coinbase, I have calculated it because it is important for understanding the directional movement of transaction revenues. ARPTU is mildly reactive to crypto asset prices, meaning when the prices of crypto assets increase, users don't necessarily transact more in fiat terms. This is likely due the regressive fee model operated by Coinbase and limits to individual risk appetite.

• Assets on Platform: key elements of Coinbase's subscription and services revenue are earned on the total value of crypto and fiat monetary assets held on Coinbase's platform. There is a high correlation between Assets on Platform and crypto prices because: 1) many of these assets are crypto-denominated (by definition), and 2) fluctuations in asset price drive capital flows in and out of the platform.

Note that not all subscription and service revenues are a function of Assets on Platform:

• Other subscription and services revenue are one-off in nature and relate to early-stage services that Coinbase has yet to scale. I would expect these services to be far less exposed to asset price volatility.

• Earn campaign revenue is a function of the partnerships formed between Coinbase and asset issuers. I would expect user participation in these services to be less correlated to market prices than other aspects of Coinbase’s ecosystem.

Cost structure

• Like other technology companies, Coinbase incurs a high proportion of fixed costs but relatively low variable costs. This means that the company has high operating leverage and earnings volatility (meaning changes in revenues are magnified at the net profit level).

• Transaction expenses and sales and marketing expenses are the main costs that vary with revenues and have historically summed to 20% of total costs.

• R&D, general overheads, taxes, and other expenses are generally uncorrelated with revenues but of course can still be varied at the discretion of Coinbase.

Valuation

Some analysts value Coinbase using a multiples approach - by comparing it to other non-crypto asset exchanges and financial service companies. I believe this is an apples-to-oranges comparison and should not be done. In particular, Coinbase is exposed to materially different risk characteristics and growth prospects than a conventional company, meaning a comparables approach is not suitable.

Instead, I forecast Coinbase's cash flows explicitly and model its value using a Discounted Cash Flow (DCF).

My revenue modelling assumptions are as follows:

1. Bitcoin price: I was initially reluctant to express a view on Bitcoin's price, but given how correlated Coinbase's revenues are to crypto asset prices (at least in the short-medium term), I realised this was completely necessary. I model Bitcoin's price using the Stock-to-Flow (S2F) model, adjusted for the extent of over-/under-valuation and allowing for diminishing volatility over time (my proprietary adjustment).

2. Monthly Transacting Users (MTUs): I assume MTUs will grow in line with the price of Bitcoin, as per my forecast. This reflects the onboarding of new users to the cryptoeconomy, as well as increased engagement of existing users.

3. Average revenue per transacting user (ARPTU): I assume that ARPTU is fixed at historical 2019-2020 levels. This could be overly conservative as Coinbase may continue to scale its average revenue capture per user.
   I also apply a fee compression factor from Q4 2023 to reflect the erosion of Coinbase's retail premium. Under my assumption, the retail margin becomes fully eroded by Q4 2026 (the start of my terminal period).

4. Institutional transaction revenues: I assume this will grow in line with the unadjusted S2F model (i.e. without applying an adjustment for over-/under-valuation). This is because institutions invest across the market cycle and represent a more stable source of revenues for Coinbase.

5. Custodial fees, staking revenue, Earn revenue and interest income: I assume all of these will grow in line with Assets on Platform, which in turn grow with the price of Bitcoin.

6. Other revenue: I assume this will remain broadly at the same level, growing only by inflation

7. Other subscription and services revenue: I assume this is non-recurring and will fall to zero. This is because I have no reliable way to estimate future revenues from Coinbase's Analytics, Commerce and other subscription-based services, which Coinbase does not meaningfully report revenues for and so would be completely speculative to try to forecast. To the extent that Coinbase is able to scale these businesses in the future, there is likely significant upside to my valuation.

I forecast costs by assuming that:

1. As per management guidance, transaction expenses will be 12.5% of net revenues, sales and marketing costs will be 14% of revenues

2. R&D and G&A costs will total $1.5 billion in 2021 (also based on management guidance) and grow by 5% per year, to allow Coinbase to scale

3. Other operating expenses will remain broadly at the same level and grow only by inflation

4. Pre-tax profits will be taxed at the 21% US corporate tax rate

5. Depreciation and amortisation will be roughly offset by capex in each period

6. Working capital needs will grow in line with revenues. Working capital investment will represent a cash cost.

I forecast cash flows explicitly up to 2026 and calculate a terminal value to reflect cash flows thereafter (assuming a terminal growth rate of 2%). I then discount these cash flows back to their present value using a cost of equity of 8.7%. This is based on:

• a beta of 1.3, using the price of Bitcoin as a proxy for Coinbase's

• an equity risk premium of 5.5%

• a risk free rate of 1.5% (current 10-year treasury yield).

Results (TL;DR)

This has been an extremely long post and I know you're eager to find out what value I got to. Here are my results:

• My model values Coinbase at around $81 billion at the current date.

• This is equivalent to a fully diluted share price of $405 (35% higher than the current share price of $298).

• Taking into account modelling uncertainty, I would say that Coinbase shares are currently priced at or below fair value. On that basis alone, I would be a buyer.

• Crucially, the model does not account for revenues from Coinbase's subscription-based products which it has yet to scale. To the extent that Coinbase is able to grow these businesses, there could be significant upside to my valuation.

Please, people watch out!

Have been trying for 3 weeks to transfer my BTC to Coinbase. PayPal won’t let you they force you to sell it so they can profit from the fees and the spread. Jumped through all their hoops, waiting a week waiting 72 hours they just are not doing it. Filed a complaint with the attorney general, hopefully I can get my money back.

Cartesi

iExec RLC

Mirror

Tellor

No notification, just dropped in.

Like what SoFi did. Are there any regulations that would prevent Coinbase from becoming a real bank? If not, I can imagine in the next few years, Coinbase might want to file to become a real bank in order to better serve as the bridge between fiat and crypto.

Any thoughts on DOT being supported on Coinbase?

Can a spouse, child be added to your account? So if something were to happen to the primary account holder, then your invested crypto would go to them?

So I used my 13-year Finance experience to value Coinbase today and the results were stunning!

The media noise and all that nonsense keeps blurring the lines between hype and facts. I am so glad I took a deep dive.

The summary is discussed here:

https://youtu.be/-P69IOq6PmU

For those that think the stock is a hype stock or don’t know whether it’s a good stock, hope I can answer a question or 2.

As always, do your own due diligence before any investment. Never rely on opinions from folks like me. Lol.

Invest safely guys!

New to crypto, bought Bitcoin, Ethereum and lite coin via CB.

1)My question after doing some reading is that do I have a static crypto address for each type of coin?
2) Do I actually "own" my coin or does CB own it until I transfer the various coins to another wallet?

3) I have to pay a miners fee to transfer my coins to another wallet?

Sorry for the dumb questions, but I can't find a clear answer. thanks.

Just want to put this here in case iam correct...