Coinbase Stock: Should You Invest?

Coinbase is a major US-based cryptocurrency exchange that went public in 2021, marking a milestone in the world of cryptocurrencies as the first pure-play crypto trading company to list on a US exchange. Coinbase stock offers investors exposure to the cryptocurrency market without directly investing in cryptocurrency. However, the company has faced challenges such as regulatory fines, security breaches, and a complex fee structure that has drawn criticism. With the recent downturn in the crypto market, should you invest in Coinbase stock?

Coinbase stock forecast

Coinbase is a major US-based cryptocurrency exchange that went public in April 2021, with its shares opening at $381 on the Nasdaq stock exchange under the ticker symbol COIN.

Since its IPO, COIN's share price has trended lower, mirroring the trajectory of the cryptocurrency market. As of January 6, 2023, the stock had plunged by over 85% compared to the same date a year prior. The share price is closely tied to the performance of the cryptocurrency markets, which are high-risk and highly volatile.

Despite the downturn, some analysts believe Coinbase remains a good investment opportunity. The company has a strong competitive position, solid underlying fundamentals, and exciting expansion prospects. Coinbase is one of the leading cryptocurrency exchanges in the world by trading volume, and it is the only US-traded cryptocurrency exchange, offering transparency to investors. Additionally, Coinbase has plans for geographic expansion and is exploring adjacent markets, such as non-fungible tokens (NFTs).

However, it is important to note that investing in Coinbase stock comes with risks. The company's financial performance is heavily influenced by the direction of the cryptocurrency markets. Coinbase's fee structure has also been criticised as complex and expensive, particularly for beginners.

As with any investment, it is essential to do your own research and understand the risks involved before making any decisions.

Coinbase's role in the future of crypto

• Security and Compliance: Coinbase has prioritized security and regulatory compliance, implementing robust security measures such as cold storage of funds, two-factor authentication, and collaboration with financial institutions. This focus on security helps legitimize cryptocurrencies and enhances their appeal to mainstream investors.
• User-Friendly Interface and Educational Resources: Coinbase has designed a user-friendly interface that is simple and straightforward, making it easier for beginners to navigate the complex world of crypto. Additionally, they provide educational resources, including guides and tutorials, to empower users to make informed decisions.
• Innovation and Accessibility: Through its innovative approach, Coinbase has broadened the accessibility of cryptocurrencies to a wider audience. They have achieved this by offering a range of services catering to both novice and experienced traders. Their mobile app, launched in 2013, was a significant milestone in this regard.
• Driving Mainstream Adoption: Coinbase has been instrumental in driving mainstream adoption of cryptocurrencies. By providing an easy-to-use and trusted platform, Coinbase has made it possible for individuals and businesses to explore and adopt crypto assets. This has contributed to the growing acceptance of crypto as a means of payment and investment.
• Crypto as an Investment Vehicle: Coinbase has positioned crypto assets as an investment vehicle, encouraging users to buy and sell crypto. The company's excellence in security, regulatory compliance, and ease of use has driven up user numbers and contributed to the perception of crypto as a viable investment option.
• Crypto as a New Financial System: Coinbase shares the vision of creating a new, open, and global financial system. They are building new products and services to help crypto holders use their coins and access decentralized finance tools. This includes developing tools for businesses to accept crypto and providing users with borrowing and lending opportunities.
• Crypto as an App Platform: Coinbase believes that crypto innovation extends beyond financial use cases. They are helping users discover new crypto apps and providing funding for projects through their venture capital arm, Coinbase Ventures. The company is committed to making crypto accessible to everyone and opening up new possibilities for people from all walks of life.
• Industry Leadership: Coinbase has evolved from a startup to an industry leader, setting standards and driving innovation in the crypto space. Their focus on security, accessibility, and innovation has established them as a trusted player in the industry, and they are likely to continue shaping the future of cryptocurrency.

Coinbase's IPO

Coinbase's direct listing generated high expectations and sparked debates about the potential "pop" in the share price upon market open. The IPO brought in many new investors, particularly those interested in the legitimisation of digital currencies. The high demand for Coinbase shares during the IPO sent the stock upwards initially, benefiting early backers of the company.

However, since the downturn in the crypto markets, Coinbase's stock has been on a downward trajectory. While some believe it will rebound, there are also alternative investment opportunities within the crypto space. The volatility of Coinbase's stock is closely tied to the performance of the cryptocurrency markets, making it a high-risk investment.

Whether Coinbase is a suitable investment depends on individual risk tolerance and investment strategy. Analyst predictions and algorithms can provide guidance, but they may be incorrect, and past performance does not guarantee future returns. It is crucial to conduct thorough research and never invest more than one can afford to lose.

Coinbase's fee structure

Coinbase Transaction Fees

Also known as the Coinbase Fee, this is a confusing fee structure that considers multiple factors. The user will pay either a flat fee or a variable percentage of the transaction, depending on region, product and payment method. Coinbase does not publish these fees, but they are usually 1% or higher.

Coinbase will disclose the fee information when the transaction is being filled. If you have a Coinbase One subscription, you will not pay transaction fees but may still pay a spread fee.

Coinbase Spread Fees

Coinbase includes the fees for spread in the price whenever you purchase or sell your crypto. It will also be included in the exchange rate if you convert your crypto. The spread allows Coinbase to temporarily lock in a price for trade execution while you review the transaction details. This spread applies to all cryptocurrency transactions on the Coinbase platform and while using the Coinbase Card.

There is no spread charged when using Coinbase Advanced because you are placing orders directly on the order book.

Coinbase Staking Fees

When you stake your crypto on the Coinbase platform, Coinbase charges a commission on the rewards that you earn. Here’s a breakdown:

• 35% for ADA, ATOM, DOT, MATIC, SOL and XTZ
• 26.3% for ADA, ATOM, DOT, SOL and XTZ if you’re an eligible Coinbase One member

Coinbase Network Fees

When you transfer cryptocurrency off the Coinbase platform, you will be charged a network fee. These fees vary based on the type of cryptocurrency being transferred, and the prevailing network fees for a stand-alone wallet-to-wallet send.

Coinbase Lightning Network Processing Fee

The Lightning Network is a micropayment network that enables the transfer of bitcoin without incurring the transaction fee associated with the Bitcoin blockchain. When you send bitcoin from Coinbase via the Lightning Network, a processing fee of 0.1% of the amount of bitcoin transferred is charged.

Coinbase Cash Fees

When you add cash or withdraw funds from your Coinbase account, there may be a fee assessed, depending on the funding method used. Here are the fees for funding or withdrawing fiat currency from your account:

If you borrow USD from Coinbase or another affiliate of Coinbase using BTC as collateral, and the BTC collateral is sold (as per the loan agreement), you are charged a flat fee of 2%.

Coinbase Card Fees

While the Coinbase card doesn’t have transaction fees, you will pay a spread fee when spending your cryptocurrency balance using the card. If you use your Coinbase card at an ATM, you may be charged operational fees.

Coinbase Advanced Fees

Coinbase Advanced is the advanced trading platform of Coinbase that is suitable for more experienced traders. Coinbase Advanced fees are based on a maker/taker model. The fees have a maximum of 0.40% maker and a maximum of 0.60% taker, based on your 30-day trailing volume. Here’s a quick explanation of maker and taker orders:

• Maker orders: “Makers” create orders for other traders to take. They add liquidity to the order book. These orders are not filled immediately.
• Taker orders: “Takers” take orders created by makers. They remove liquidity from the order book. These orders are made at market price and filled immediately.

Coinbase's security protocols

Coinbase has several security protocols in place to protect its users' accounts and assets. Here are some of the key features:

• Password Security: Coinbase employs password security measures to protect user accounts.
• Two-Factor Authentication: Coinbase offers two-step verification as an additional security layer when logging into user accounts.
• Device Confirmation: Coinbase sends device confirmation emails to ensure users are notified of any unauthorised access attempts.
• Phishing and Scam Protection: The platform provides resources to help users identify and report phishing sites and technical support scams.
• Account Security: Coinbase allows users to lock their accounts temporarily or enable auto-lock features to prevent unauthorised access.
• Recovery Phrase: A 12-word recovery phrase acts as the master password for the Coinbase Wallet. It is crucial to keep this phrase safe and private, as losing it will result in losing access to your assets.
• Biometrics and Security Locks: Coinbase Wallet offers additional security options, including biometrics, passwords, and security locks, to protect user devices.
• Transaction Transparency: Coinbase Wallet provides transaction previews and token approval alerts, allowing users to make informed decisions before confirming transactions.
• Dapp Blocklist: Coinbase's security team maintains a blocklist of malicious dapps to protect users from potential threats while exploring web3 applications.
• Spam Token Management: Coinbase Wallet hides suspicious tokens known to be used for malicious purposes and allows users to report and manage spam tokens.
• Multiple Addresses: Coinbase Wallet supports multiple address sets, enabling users to keep their assets and web3 identities separate for added security and privacy.
• Permission Management: Users can easily review and revoke permissions for dapp connections, minimising potential vulnerabilities and controlling data access.

Frequently asked questions