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Published Nov 6, 2023

195 - The Bull Case for $COIN | Michael Rinko & Jay

Join Michael Rinko and Jay as they delve into Coinbase's impressive market resilience and growth strategies, including its diversification into interest income and ETH staking, international expansion into offshore derivatives, and innovative Layer Two scaling efforts with the Base initiative, all positioning it for dominance in the evolving crypto landscape.
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  • Interest Income

    Coinbase's interest income strategy is a key component of its revenue model. explains that Coinbase earns interest by investing customer deposits and USDC in short-term government debt, capturing yields from these investments 1. This approach allows Coinbase to generate revenue even during bear markets, as highlights the partnership with Circle to mint USDC and invest in treasuries 2.

    Coinbase was very aware of the fact that its revenue is tied to the health of the overall crypto ecosystems.

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    This model mirrors traditional banking practices, positioning Coinbase as a resilient player in the financial landscape.

       

    ETH Staking

    ETH staking is another significant revenue stream for Coinbase, with a substantial portion of staked ETH coming from institutional investors. notes that Coinbase's ETH staking has grown from $3 billion to $7 billion, with $2.2 billion from institutions 3. This growth is attributed to the ease of staking through Coinbase, which charges a 25% fee for its services, higher than competitors like Lido 4.

    The way the staking rewards works is that as more ETH is staked, that APY trends downwards.

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    Despite the high fees, Coinbase's reputation and user-friendly platform make it a preferred choice for many.

       

    Base and USDC

    Coinbase's Base initiative and its relationship with USDC are pivotal for its long-term growth. describes Base's profitability, noting a temporary surge due to a MetaMask bug, but emphasizes its potential as a long-term play for Coinbase 5. Additionally, Coinbase's dominance in retail onboarding is highlighted by its high take rates on transactions, which are significantly higher than traditional finance benchmarks 6.

    Base is probably not going to affect Coinbase's financials in the short term, but as we can get into, it's probably more of like a long term play.

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    This strategy underscores Coinbase's focus on establishing itself as a primary gateway for crypto adoption.

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