Original Author / Tiago Souza, Mario Stefanidis
Compiled by / Odaily Planet Daily Golem(@web 3_golem)
Editor's Note: On February 13th, Coinbase released its Q4 and full-year 2025 financial report.The reportshowed that although Coinbase had a strong full-year performance, with trading volume and market share doubling, and platform assets and USDC balances reaching all-time highs, it recorded a net loss of $667 million in Q4 2025, with a loss per share of $2.49, and total revenue of $1.78 billion, falling far short of analysts' expectations.
Consequently, several Wall Street investment banks, including JPMorgan and Canaccord,loweredtheir target price for Coinbase stock. However, by the close of U.S. markets on February 14th, COIN still surged by 16.46%, seemingly unaffected by the Q4 earnings miss, proving that the market remains optimistic about Coinbase's various business developments in 2026 in the short term.
But analysts at Artemis believe that in sector investing, timing is crucial. In the long run, Coinbase's market prospects are promising, but in the short term, its returns are not sufficient to compensate for the risks. Coinbase remains highly cyclical. Given the continued pressure on brokerage fundamentals and the lagging impact of the current market downturn, the market's general expectations for Coinbase in 2026 are still too high. Therefore, it is not advisable to buy its stock now.
The analysts systematically explained Coinbase's business revenue composition, current advantages, and future challenges. Odaily Planet Daily has compiled and translated the key points of the analysis as follows for investors' reference.
Conclusion First: Not Recommended to Invest in Coinbase Now
Coinbase's Core Financial Data Over the Years
We currently do not recommend investing in Coinbase because we believe its current returns are insufficient to compensate for the risks. Although Coinbase still holds an absolute leading position in the U.S. market, with a strong institutional client base, a favorable regulatory status, and solid domestic competitive advantages, the timing of investor entry is crucial.
Looking back at previous cryptocurrency sell-offs, earnings estimate downgrades and P/E multiple compression typically persist for some time after the initial price correction, as declining account asset sizes and weak trading activity lag behind financial performance. We expect a similar pattern in the current cycle.
Given the continued pressure on Coinbase's brokerage fundamentals and the high likelihood of earnings missing expectations for fiscal 2025 and 2026, downside risks remain significant. Although Coinbase's long-term franchise value persists, short-term volatility and the potential for earnings to fall short lead us to conclude: at this stage of the cycle, the expected return is insufficient to compensate for the risk.
Overview of Coinbase's Business Income Proportion
Coinbase is a centralized cryptocurrency platform whose primary source of income is its brokerage business, providing digital asset trading intermediary services to retail and institutional clients. The platform matches client trades with liquidity providers, uses public blockchains to record and settle asset ownership, and integrates with the traditional banking system for fiat currency deposits and withdrawals.
Despite the competitive and cyclical nature of the trading market, Coinbase is actively expanding its business scope beyond a pure trading economy model towards broader crypto financial infrastructure and has embedded multiple initiatives directly into its core application. These initiatives include:
- Coinbase One, a subscription product offering zero-fee trading and enhanced services, designed to boost recurring revenue and customer retention;
- Prediction markets (in partnership with Kalshi), expanding Coinbase's derivatives and event-driven trading capabilities;
- Tokenized stocks, enabling users to access traditional financial assets via blockchain.
In addition to existing businesses like institutional custody and prime broker services, staking and on-chain yield, stablecoin distribution and payments, and derivatives, Coinbase is also building application and settlement infrastructure through its open-source, permissionless Ethereum Layer-2 network, Base.
These initiatives aim to enhance customer engagement and retention, especially at the institutional level, diversify revenue towards more recurring and infrastructure-related income, and transform Coinbase from a trading-oriented broker into a platform and gateway connecting traditional finance with on-chain markets.
Transaction Business Revenue
56% of Total Revenue | 6-Year CAGR 36% | Market Size: $27 Billion (2024)
Transaction revenue is the core brokerage business of Coinbase, which holds about a 14% market share in this area. Revenue comes from transaction fees and spreads charged on platform trading volume.
Trading volume is primarily driven by total platform assets, which are $516 billion, with retail contributing 42% and institutional clients 58%. Although institutional clients contribute most asset growth, retail remains the primary source of profitability due to significantly higher trading spreads.
- Retail Spread: ~154 basis points
- Institutional Client Spread: ~6 basis points
Institutional clients trade through Coinbase Prime, a suite of standalone products offering advanced execution algorithms, smart order routing, and over-the-counter (OTC) block trading services. These clients require more sophisticated infrastructure but yield lower revenue per dollar, highlighting the importance of retail participation for Coinbase's overall margin profile.
Subscription and Services Revenue
44% of Total Revenue | 6-Year CAGR 232%
This segment aggregates Coinbase's non-transaction revenue sources, reflecting the company's strategic shift towards a recurring, infrastructure-driven profit model. It includes the following parts:
- Stablecoins (30% of Revenue)
Stablecoin revenue is primarily influenced by USDC adoption and the federal funds rate. Coinbase earns interest income from USDC reserves through a revenue-sharing agreement with its issuer, Circle.
Under the August 2023 agreement, Coinbase receives all interest income generated by USDC on its platform, while interest from USDC off-platform is split 50/50 between Coinbase and Circle.
This structure makes USDC Coinbase's most significant non-transaction revenue source, creating a scalable but interest-rate-sensitive revenue stream that helps reduce the company's reliance on volatile trading volumes (transaction revenue still accounted for 86% of total revenue in 2020).
Notably, the majority of the economic value from the Circle partnership accrues to Coinbase, reflecting Coinbase's control over distribution and user access. Data shows that USDC's market share stabilized after a period of decline following Circle's distribution agreement with Coinbase, then began to recover, highlighting the central role large, trusted platforms play in stablecoin adoption and reinforcing the strategic value of Coinbase's distribution advantage.
- Staking Services (10% of Revenue)
Clients stake crypto assets through Coinbase, and the company earns a commission from the staking rewards. In proof-of-stake (PoS) networks like Ethereum and Solana, staking involves locking assets to support network validation. Validators receive rewards akin to yield, which Coinbase facilitates, taking a portion as a fee.
Key revenue drivers for this segment include crypto asset prices and overall blockchain activity.
- Other Services (4% of Revenue)
This category includes several monetization initiatives launched post-IPO and currently scaling:
- Coinbase One, a subscription service offering lower trading fees, enhanced rewards, and priority customer support;
- Base, Coinbase's L2 blockchain, enabling developers to build applications and services on-chain;
- Payments, including a prepaid debit card launched in partnership with Visa, allowing customers to shop with fiat and earn crypto rewards. Transactions settle in fiat, but the user experience resembles native crypto payments.
Bull and Bear Debates Around Core Coinbase Issues
Can Coinbase significantly reduce its cyclicality, or will its stock remain a leveraged proxy for cryptocurrency (primarily Bitcoin) prices?
Historically, COIN's stock price has been highly correlated with Bitcoin and broader cryptocurrency prices, reflecting its earnings being driven by spot trading volume.
- Bull Case: Management's moves into subscriptions, stablecoins, derivatives, custody, and Base will diversify revenue and reduce cyclicality over time.
- Bear Case: Despite these initiatives, spot trading still dominates its economics, meaning declines in Bitcoin and major cryptocurrency prices will impact its stock price.
Declining crypto assets directly lead to lower trading volumes, margins, and earnings.
Can stablecoins significantly improve the company's profit profile?
- Bull Case: USDC-related revenue is a scalable, high-margin business tied to on-chain payments, treasury usage, and tokenized cash, providing a partial hedge against trading volatility.
- Bear Case: Stablecoin revenue is highly sensitive to interest rates, asset mix, and competitive landscape, meaning rate cuts or changes in custody balances could significantly compress earnings. If stablecoin profits prove cyclical rather than structural, the perceived downside protection in Coinbase's earnings model would be diminished.
How will regulatory changes over the next 12-24 months affect the company's profit profile?
- Bull Case: Clearer rules will facilitate institutional participation and cement Coinbase's position as the default on-ramp to the crypto market as the most compliant platform in the U.S.
- Bear Case: Regulation could also attract traditional brokers and financial institutions into crypto, accelerating fee compression and intensifying competition, especially in the retail market. Greater legitimacy might expand trading volumes but could come at the cost of long-term pricing power.
Centralized Exchange Challenges and Coinbase's Unique Advantages
The Rise of DEXs in the Global Trading Market
Globally, the total addressable market (TAM) for both centralized exchanges (CEXs) and decentralized exchanges (DEXs) is the same underlying pool of capital: cryptocurrency trading activity encompassing spot, derivatives, and on-chain asset swaps, with annual nominal volumes currently in the trillions of dollars.
For spot trading alone, industry data shows global CEX spot volume exceeded $18 trillion in 2024, while derivatives volume is much larger. In the U.S., the spot TAM is smaller but still substantial, with USD-denominated spot volume estimated at around $1.5 trillion annually, reflecting the importance of the U.S. for fiat liquidity and price discovery. Historically, centralized exchanges (CEXs) have captured the majority of this market due to their deep liquidity, easy fiat on-ramps, and more user-friendly experience, especially for retail and institutional participants.
However, over time, the share of decentralized exchanges (DEXs) in global trading volume has steadily grown, from low single digits a few years ago to the low twenties today. This shift is more pronounced outside the U.S., where DEX usage benefits from permissionless access, while U.S. market share remains noticeably lower, constrained by fiat dependency and regulatory friction.
The underlying drivers are structural: L2 networks have reduced transaction costs and improved execution quality and liquidity depth, coupled with the rapid development of the on-chain ecosystem, where functions like trading, lending, and yield generation are increasingly happening natively.
Simultaneously, increased regulatory and compliance burdens have limited product flexibility for CEXs in multiple jurisdictions, while DEXs remain globally accessible by design. Additionally, it's worth mentioning that in the U.S., increased regulatory and compliance burdens similarly limit product flexibility for CEXs in multiple jurisdictions, while DEXs are accessible globally without permission.
Therefore, although CEXs still dominate absolute trading volume and institutional flow, especially in the U.S., DEXs are capturing an increasingly larger share of the global trading market TAM, reflecting a gradual but persistent reallocation of trading activity.
Coinbase's Advantages in the U.S. Market
In the global cryptocurrency market, trading fees vary significantly across platforms, reflecting differing regulatory regimes, cost structures, and competitive intensities. In this context, Coinbase has historically charged fees significantly higher than most global peers, primarily due to its U.S.-centric operational model.
Operating fully within the U.S. regulatory framework implies higher costs (covering compliance and custody standards, reporting, capital requirements, etc.), but it also provides users with a level of legal security and clarity that offshore platforms cannot match. For U.S. retail users, especially during periods of strong market growth, this trade-off has justified paying a premium for convenience, trust, and regulatory certainty.
Fee Rates Charged by Different Exchanges
In the U.S., Coinbase holds a uniquely strong position as the largest and longest-standing regulated cryptocurrency exchange, particularly in USD-denominated spot trading.
Coinbase accounts for approximately 40% to 50% of U.S. spot cryptocurrency trading volume, with its share even higher during periods of market stress when counterparties prioritize balance sheet safety and regulatory clarity. Coinbase's core customer base includes U.S. retail users who value ease of use and reliable fiat on-ramps, as well as institutional clients (including asset managers, ETFs, corporations, and market makers) who value convenience and regulatory certainty.
This two-sided franchise model is bolstered by deep banking relationships, integrated custody services, and a long-standing engagement with U.S. regulators.
But the competitive landscape in the U.S. differs markedly from global markets. Coinbase's main competitors include Robinhood (which competes aggressively on price in the retail market but offers a narrower range of crypto products), Kraken (which attracts more active traders with lower fees), and Binance.US (whose scale and product breadth remain limited compared to its global parent).
Unlike offshore platforms, these competitors operate under similar regulatory constraints, limiting fee arbitrage and product differentiation. Therefore, competition in the U.S. is less about who offers the lowest global fees and more about trust, compliance, and dollar liquidity. Coinbase's regulatory credibility, institutional penetration, and dominant dollar on-ramp status cement its leadership in the U.S. crypto market, even as competitive pressures intensify at the margins.
Three Arguments for Expecting Suboptimal Future Performance for Coinbase
Argument 1: Brokerage business is expected to face pressure in Q4 2025, potentially leading to FY2025 revenue being about 7% below market expectations
Although Coinbase is expanding other services on its platform, its earnings remain highly dependent on two major business segments: brokerage and stablecoin-related revenue. This expected performance decline primarily stems from continued pressure on the brokerage business in Q4 2025. We estimate using the Artemis terminal to track Coinbase's spot trading volume, which historically has an average error of about 2.5% for quarter-end volume estimates.
Current data indicates a slowdown in trading activity this quarter, with Q4 2025 trading volume around $249 billion. We expect retail take rates to decline, consistent with patterns observed during previous crypto sell-offs, where retail take rates fell to around 130 basis points due to lower volatility and increased competition. Institutional take rates, already structurally low, are expected to remain below 5 basis points, aligning with patterns from historical downturns.
Argument 2: Headwinds for the brokerage business are expected to persist into 2026, but due to portfolio structure changes, the downward pressure will be less severe than during the 2022/2023 crypto winter; 2026 EPS is expected to be 14% below expectations
We expect earnings pressure to persist in 2026, primarily influenced by the cryptocurrency sell-off that began in 2025 and extended into early 2026. A core variable in the brokerage revenue model is assets per account (the average dollar value held by clients), which has historically been highly correlated with total cryptocurrency market capitalization (~0.8 for retail accounts, ~0.6 for institutional accounts). This dynamic is particularly important given retail clients' higher sensitivity to market swings and typically higher fee rates.
As of February 2026, the total cryptocurrency market cap is down approximately 20% from the end of 2025, following a 22% decline in Q4 2025, indicating continued pressure on client asset balances. In our base case forecast, we project a compression of nearly 10% in retail assets per account for 2026, and a compression of nearly 10% in institutional account balances.
We assume a recovery pattern consistent with previous cycles in 2027, with market cap rebounding to 2024 levels, followed by sustained growth of around 15% annually, leading to upside above consensus expectations in the outer years.
On the stablecoin front, we continue to expect strong growth, projecting ~40% growth in 2026, driven primarily by USDC market cap growing ~70% from 2025, albeit slowing from the ~110% growth seen from 2024 to 2025. This growth partially offsets brokerage weakness.
However, overall, we project total revenue to decline ~1% in 2026, implying revenue ~17% below consensus, and EPS to decline ~15%, as operating leverage amplifies the impact of weak trading fundamentals.
Argument 3: Regulatory progress in 2026 is structurally positive but too slow to offset near-term earnings pressure
We expect regulatory clarity in the U.S. crypto market to improve in 2026, potentially through partial market structure legislation, reducing legal uncertainty and strengthening the position of compliant incumbents like Coinbase. In principle, clearer rules could be a significant catalyst for broader crypto adoption, especially among institutional investors, unlocking new pools of capital and expanding the TAM.
A former member of the SEC's crypto working group previously stated, "regulators are expected to issue guidance clarifying the line between securities and non-securities in the crypto space, provide potential innovation exemptions for tokenized securities and new on-chain market structure pilot programs, and expand the use of no-action letters to indicate that certain activities are not enforcement priorities."
However, the legislative process remains slow, and the pace of implementation suggests any substantial adoption benefits will materialize gradually over time, not immediately. In the near term, Coinbase's financial performance remains primarily by cryptocurrency prices, retail trading volumes, and take rates—factors currently under pressure in a prolonged adjustment phase. Institutional adoption, while supported by regulatory progress, is often gradual and carries structurally lower trading margins.
Furthermore, regulatory optimism is already largely priced into market sentiment following ETF approvals and recent policy signals. Therefore, while regulatory improvement does represent a long-term structural positive, its slow-moving nature means these benefits are unlikely to offset near-term earnings headwinds, creating downside risk to 2026 and 2027 consensus expectations.
Valuation Forecast Under Different Scenarios
Low Valuation Scenario
We assume a prolonged downturn comparable to the 2022-2023 cycle, projecting a ~50% decline in assets per account in 2026, remaining flat in 2027, reflecting sustained user engagement and asset balance weakness. We assume USDC growth slows to ~25% annually as on-chain activity and risk appetite remain subdued.
In this scenario, pressure on Coinbase's brokerage business persists, operating leverage remains constrained, and visibility on earnings sustainability diminishes. Consequently, we apply a more conservative 25x NTM P/E multiple as an exit multiple for end-2026, appropriate for Coinbase valued as a highly cyclical brokerage. This scenario implies a ~15% negative IRR, highlighting the downside risk if the adjustment is deeper and longer than expected.
Base Case Scenario
We assume a more moderate adjustment, with nearly a 10% decline in retail assets per account and nearly a 10% decline in institutional assets per account in 2026, followed by a recovery to 2024 levels in 2027 as crypto market cap rebounds.
On stablecoins, we model ~40% annualized growth, with stronger growth in 2026 and 2027 (~70% and ~60% respectively), reflecting continued USDC adoption. Growing stablecoin revenue partially offsets brokerage weakness and gradually improves the overall revenue mix.
We apply a 30x NTM P/E multiple as an exit multiple for end-2027, implying an attractive ~20% IRR over three years. However, we acknowledge path dependency is crucial: although the model's terminal earnings are promising, the expected earnings miss in 2026 and potential future fluctuations make the risk-adjusted trajectory less attractive.
Optimistic Scenario
We assume an initial adjustment similar to the base case, with nearly a 10% decline in retail assets per account and a ~14% decline in institutional assets per account in 2026, followed by a stronger rebound starting in 2027. Under this scenario, assets per account grow ~80% in 2027 and 2028, broadly in line with the growth seen during the 2023-2024 recovery, followed by sustained growth in the high single digits thereafter.
On stablecoins, we forecast USDC market cap growing at a ~56% CAGR through 2030, with ~80% growth in 2026 and ~50% in 2027, reflecting accelerated USDC adoption and expanding on-chain utility.
Under these assumptions, Coinbase's revenue mix becomes significantly less cyclical, supporting higher operating leverage and justifying a 35x expected NTM P/E valuation by end-2027, implying a ~226% IRR over three years.
