July 30, 2021
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Transcript

Marko Rojnica

Coinbase is an American company that operates the largest cryptocurrency exchange platform in the United States by trading volume.

On the platform, you can securely buy, sell, transfer and store digital currency.

On April 14th, 2021, Coinbase went public on the Nasdaq exchange under the COIN ticker.

The stock opened up at $381, quickly went to as high as $430, only to open down at $348 the next day.

There were even big, notable investors like Cathie Wood entering the name right at the IPO, where she bought $580 million worth of shares on the second day of the IPO.

After the initial excitement, the stock started trading down, going as low as $258 on May 7th before making a bounce-back on May 10th when Elon Musk appeared on the Saturday Night Live and supported Dogecoin

Then, as expected, while Bitcoin was taking a beating and almost lost half of its value, COIN stock got hurt, reaching a low of $208, losing 45% of it’s IPO price!

As the stock kept trading sideways, we had Cathie Wood come in on a dip to increase her position to $1.04 billion on June 22nd.

Since then, COIN has been trading up and down, being closely influenced by the price of Bitcoin and other cryptocurrency, which brings us to today’s levels in the stock.

So, where is COIN going next, and how can we use Options to profit from it?

In this video, I’ll guide you through the bull and the bear case…

Then, we’ll get Felix Frey on to give us his view on the stock, and show us a few different Options plays that you can use, whether you’re bullish or bearish.

So stay tuned, you don’t want to miss it!

So, we have a very exciting cryptocurrency exchange company that lost around 40% of it’s initial IPO price in just over 3 months.

My name is Marko Rojnica and I’m going to show you what the bulls and bears are saying about COIN, and then, we’re going to have Felix Frey show us a few different options plays.

But first, what is Coinbase?

Coinbase was founded in 2012 by Brian Armstrong and Fred Ehrsam and one interesting fact about Coinbase is that they have no physical headquarters.

Coinbase offers products for both retail and institutional crypto investors, as well as other related crypto products.

First you have Coinbase, the primary app through which you buy, store and trade different cryptocurrencies.

Then there’s Coinbase Pro, which is a professional asset trading platform for trading digital assets.

Coinbase Wallet is an app that allows customers to access various different decentralized crypto apps.

Their trading platform for institutional customers is Coinbase Prime, and there’s also Coinbase Custody, which is a specialist level service for institutions that hold bitcoin and other cryptos with Coinbase.

Some other crypto-related products on Coinbase include the USD coin, which is a digital stablecoin that lets you exchange US dollars in exchange for cryptocurrency that has the same value.

There’s also the Coinbase Card, which is a debit Visa card that allows customers to spend cryptocurrency, and lastly, there’s Coinbase Commerce, which is a payment service for merchants.

We can see that Coinbase is trying to be a one-stop shop for all cryptocurrency related activities.

Now that we know a little bit more about Coinbase, let’s start off with what the bulls are saying!

1) Strong Growth Numbers

In Q1 of 2021, COIN had over 56 million verified users with $335 billion in volume traded in the quarter. There were $223 billion in assets on the platform, and their platform is available in more than 100 countries.

Over the years, Coinbase has become the gold standard for trading cryptocurrencies, which is unlikely to change. To further facilitate that growth argument, let’s take a look at their numbers.

COIN’s revenue increased by $1.61 billion in Q1 2021, to $1.8 billion, up from $190 million in Q1 2020. That’s an 844% increase in just one year!

Their net income increased by $739 million in Q1 2021, to $771 million, up from $32 million in Q1 2020. That’s a staggering 2,312% increase YoY.

That means their net income margin was 42.83%, which is very impressive. The Q2 2021 results are coming out on August 10th, and COIN states that their Q2 2021 performance is trending to meet or exceed its Q1 results.

With such strong numbers in mind, let’s take a look at the second bullish point, and that is...

2) Bright Crypto Future

The bulls are quick to argue that Coinbase is uniquely positioned for mainstream crypto adoption and long-term growth. They can do this by using their billions in cash flow today to prepare for a deeper foray into the DeFi (decentralized finance) world.

And we can see that with every single day that passes, more and more people become involved with cryptocurrencies in some form or another.

The company is strategically acting with a long-term mindset focused on making itself the infrastructure that drives such crypto adoption.

Coinbase is going as far as establishing relationships within the government and those that influence monetary policy.

Take a look at this picture of Paul Ryan and Brian Armstrong, who is the CEO of Coinbase.

Also, they are getting into various areas of personal finance, providing access to cryptocurrency for retirement accounts. They’re rolling out banking-like features for Crypto investors, including crypto-backed lending.

Bulls argue that Cryptocurrencies are here to stay, so it’s only logical that the #1 company when it comes to Crypto trading in the US would grow together with the financial product it revolves around.

With the right steps they’re taking right now, and with further adoption of cryptocurrencies by the mainstream, COIN is set up for a bright crypto future.

Let’s now move on to the last bullish argument.

3) Providing Services for Institutional Customers

As of Q1 2021, COIN generates over 90% of its revenue from retail transactions, however, institutional investors are an essential part of the company’s business model.

As you can see, Coinbase institutional investors are divided into two groups, Direct Clients, which include Hedge Funds, Private Equity, Insurance Companies etc., as well as Broker Clients like Fintechs, ETFs, banks and exchanges.

They do all of that through Coinbase Prime, which is an integrated platform that provides clients with trading, custody, and prime services. With Prime, Coinbase brings all the tools and services their clients need together, providing them with a unified product experience.

Coinbase showed they mean business through acquiring various different companies that would help them in their efforts of getting into the institutional space.

The first of these institution focused acquisitions was Neutrino, which served as the basis for Coinbase Analytics.

Then they acquired Xapo, which operates cold crypto storage for institutions.

Tagomi offers many of COIN Prime’s features, including custody and brokerage services.

They also bolstered their Prime offering with Routefire and Skew acquisitions, both of which provide advanced analytical services for institutional investors.

Bulls argue that their most significant acquisition was Bison Trails, which cost them around $465. Bison Trails is a cloud-based platform providing crypto infrastructure products and services that COIN hopes to use to “help other companies build protocols and applications, helping to grow the crypto economy overall”.

If Coinbase manages to become the #1 platform for institutional investors as it is for retail investors right now, there is a lot of money to be made over the foreseeable future.

Now, before moving on to the bear arguments, let’s quickly recap the bullish points we’ve made in Coinbase.

The bulls start off with Coinbase’s strong growth numbers. Following that is their bright crypto future as the #1 retail crypto investing platform in the US. Lastly, there’s a lot of opportunity in institutional investing for Coinbase, and they are setting themselves up for success by expanding into that market.

Those were the main bullish points in COIN, but let’s now take a look at what the bears are saying…

1) Dangers of Tether

Tether is a stablecoin, a type of cryptocurrency which aims to keep cryptocurrency valuations stable.

It’s the 3rd largest cryptocurrency in the world. Tether is tied to the US dollar, meaning that 1 tether is worth $1 USD.

Investors primarily use Tether as a form of liquidation in the crypto market by converting their other cryptocurrencies into Tether, which is stable, and then liquidating them via the US dollar whenever they please.

Bears are primarily concerned about systemic problems with Tether, such as a shady background behind the founders and the entire coin, as well as a potential liquidity crisis which would endanger all cryptocurrencies, and with that, Coinbase.

Since May3rd of this year, COIN has fully accepted Tether across all platforms. In fact, Tether is crucial in that about 60% of daily Bitcoin transactions happen in Tethers.

To make things even more interesting, New York State Attorney General conducted a 2 year investigation into Tether, and had banned all New York residents from trading it.

There are also a lot of concerns behind the company that founded Tether and their owners, with financial coverups, manipulations of financial statements, uncovered reserves and liquidity, as well as existing investigations that are taking place right now, such as a criminal probe into bank fraud which was announced just a few days ago.

We also have the Fed Chief Jerome Powell making his argument against stablecoins and cryptocurrency in favor of the digital U.S. currency.

There seems to be a lot of risk involving Tether, which would negatively impact the entire crypto market, thus hurting Coinbase.

Now, with that being said, let’s take a look at the second bearish point.

2) Cryptocurrency Volatility & Uncertainty

As already noted in the bulls case, a lot of Coinbase’s future is dependent on the state of the crypto market.

But that also presents a potential negative if that same market was to tank or go down, thus negatively impacting the stock.

Such volatility and valuation of cryptocurrencies make for a volatile exchange revenue for Coinbase. This is one of the main reasons why they’re diversifying their offering so much into other products and services.

We’re seeing that happen right now with the price of Bitcoin. As Bitcoin is going up, so does Coinbase, but as soon as there’s a correction or a crash in Bitcoin, COIN investors feel it immediately.

There have also been a lot of news revolving around crackdowns on cryptocurrency activities, with such a case happening in China, where they have aggressively gone after crypto mining.

The fact that Coinbase operates in a not fully regulated environment yet is also another reason why bears are very pessimistic about its future.

Just like China, there might be other governments around the world that decide to crack down on cryptocurrencies in order to control their money supply, and if that were to happen, exchanges and brokerages would be the first to suffer since they’ll be required to comply with laws that are implemented.

While some may consider this red-tape, it’s essentially another cost that Coinbase would have to bear which would reduce their bottom line.

So, because of the uncertainty in the cryptocurrency market and the potential crackdowns around the world, Coinbase might be at great risk in the near future.

With that in mind, let’s take a look at the last bearish point, and that is...

3) Competition Concerns

In the case of Coinbase, bears argue that the business is not sustainable, as they’re enjoying a first mover advantage.

With other competitors entering the market, Coinbase will see margin pressures as competing exchanges bring down the margins on transaction fees.

For example, Robinhood offers free crypto trading, whereas Coinbase charges retail investors nearly 1.5% on average.

Although Coinbase is a giant among US crypto investors, they’re a relatively small player globally. For example, centralized exchange leader Binance is doing approximately 10x Coinbase’s daily volume.

There is also an emerging threat from decentralized exchanges such as Uniswap and Sushiswap.

As one of the biggest downside, the fact that Coinbase is an exchange and a broker, they don’t have any pricing power or other advantages against their competitors.

We mentioned Robinhood, but the additional pool of possible competitors could also include companies like Square and PayPal, which are giants in the space looking to rapidly expand into the cryptocurrency market.

As the adoption continues and the competitive space gets more saturated, there’s a high possibility that the entire industry will move to a zero-fee environment to gain more clients.

And with over 90% of Coinbase’s revenues coming from retail transactions, this poses a great threat to the company since it has no real competitive edge over other competitors.

So, those were the main bearish points in Coinbase…

Let’s now take another look at the bullish & bearish points before having Felix Frey on to give us a few different trade ideas in COIN.

Bullish Points

  • Strong Growth Numbers
  • Bright Crypto Future
  • Providing Services for Institutional Customers

Bearish Points

  • Dangers of Tether
  • Cryptocurrency Volatility & Uncertainty
  • Competition Concerns

So, that was the rundown of Coinbase, where we looked at the bullish and bearish points, but now it’s time to get Felix Frey on…

Where he’ll give us his view on the stock, lead us through the technical analysis and give us a few different options trade ideas that we can play no matter if we’re bullish or bearish…

Stay tuned, the best is about to come!

Felix Frey

Coming soon

Marko Rojnica

Thank you Felix for giving us a few different Options Trades to consider in Coinbase…

Now, if you enjoyed the video, please leave a like 

AND if you’d like to see more stock analysis just like this one… 

make sure you subscribe to the channel and turn on the bell notifications.

Also, I would love to hear your thoughts on COIN... And I’d like YOU to add to the story. Comment your thoughts & opinions on the bullish & bearish cases we’ve made… and tell us where you think COIN is going next.

Don’t forget, OptionsGeek also has a comprehensive Options education program called 3 Steps to Profit that teaches you how to Trade Options like the Top 1%.

As a bonus, you also get 1 month free of Felix Frey’s Winning Picks Premium ideas, so make sure you check the link in the description!

Get 3 Steps to Profit + 1 Month of Free Winning Picks Premium Ideas

Thank you, I’ll see you in the next one.

Watch Next

CCIV Bulls vs Bears

SKLZ Bulls vs Bears

NIO Bulls vs Bears

FUBO Bulls vs Bears

AMD Bulls vs Bears

CLF Bulls vs Bears

Find Your Next Idea


Transcript

Marko Rojnica

Coinbase is an American company that operates the largest cryptocurrency exchange platform in the United States by trading volume.

On the platform, you can securely buy, sell, transfer and store digital currency.

On April 14th, 2021, Coinbase went public on the Nasdaq exchange under the COIN ticker.

The stock opened up at $381, quickly went to as high as $430, only to open down at $348 the next day.

There were even big, notable investors like Cathie Wood entering the name right at the IPO, where she bought $580 million worth of shares on the second day of the IPO.

After the initial excitement, the stock started trading down, going as low as $258 on May 7th before making a bounce-back on May 10th when Elon Musk appeared on the Saturday Night Live and supported Dogecoin

Then, as expected, while Bitcoin was taking a beating and almost lost half of its value, COIN stock got hurt, reaching a low of $208, losing 45% of it’s IPO price!

As the stock kept trading sideways, we had Cathie Wood come in on a dip to increase her position to $1.04 billion on June 22nd.

Since then, COIN has been trading up and down, being closely influenced by the price of Bitcoin and other cryptocurrency, which brings us to today’s levels in the stock.

So, where is COIN going next, and how can we use Options to profit from it?

In this video, I’ll guide you through the bull and the bear case…

Then, we’ll get Felix Frey on to give us his view on the stock, and show us a few different Options plays that you can use, whether you’re bullish or bearish.

So stay tuned, you don’t want to miss it!

So, we have a very exciting cryptocurrency exchange company that lost around 40% of it’s initial IPO price in just over 3 months.

My name is Marko Rojnica and I’m going to show you what the bulls and bears are saying about COIN, and then, we’re going to have Felix Frey show us a few different options plays.

But first, what is Coinbase?

Coinbase was founded in 2012 by Brian Armstrong and Fred Ehrsam and one interesting fact about Coinbase is that they have no physical headquarters.

Coinbase offers products for both retail and institutional crypto investors, as well as other related crypto products.

First you have Coinbase, the primary app through which you buy, store and trade different cryptocurrencies.

Then there’s Coinbase Pro, which is a professional asset trading platform for trading digital assets.

Coinbase Wallet is an app that allows customers to access various different decentralized crypto apps.

Their trading platform for institutional customers is Coinbase Prime, and there’s also Coinbase Custody, which is a specialist level service for institutions that hold bitcoin and other cryptos with Coinbase.

Some other crypto-related products on Coinbase include the USD coin, which is a digital stablecoin that lets you exchange US dollars in exchange for cryptocurrency that has the same value.

There’s also the Coinbase Card, which is a debit Visa card that allows customers to spend cryptocurrency, and lastly, there’s Coinbase Commerce, which is a payment service for merchants.

We can see that Coinbase is trying to be a one-stop shop for all cryptocurrency related activities.

Now that we know a little bit more about Coinbase, let’s start off with what the bulls are saying!

1) Strong Growth Numbers

In Q1 of 2021, COIN had over 56 million verified users with $335 billion in volume traded in the quarter. There were $223 billion in assets on the platform, and their platform is available in more than 100 countries.

Over the years, Coinbase has become the gold standard for trading cryptocurrencies, which is unlikely to change. To further facilitate that growth argument, let’s take a look at their numbers.

COIN’s revenue increased by $1.61 billion in Q1 2021, to $1.8 billion, up from $190 million in Q1 2020. That’s an 844% increase in just one year!

Their net income increased by $739 million in Q1 2021, to $771 million, up from $32 million in Q1 2020. That’s a staggering 2,312% increase YoY.

That means their net income margin was 42.83%, which is very impressive. The Q2 2021 results are coming out on August 10th, and COIN states that their Q2 2021 performance is trending to meet or exceed its Q1 results.

With such strong numbers in mind, let’s take a look at the second bullish point, and that is...

2) Bright Crypto Future

The bulls are quick to argue that Coinbase is uniquely positioned for mainstream crypto adoption and long-term growth. They can do this by using their billions in cash flow today to prepare for a deeper foray into the DeFi (decentralized finance) world.

And we can see that with every single day that passes, more and more people become involved with cryptocurrencies in some form or another.

The company is strategically acting with a long-term mindset focused on making itself the infrastructure that drives such crypto adoption.

Coinbase is going as far as establishing relationships within the government and those that influence monetary policy.

Take a look at this picture of Paul Ryan and Brian Armstrong, who is the CEO of Coinbase.

Also, they are getting into various areas of personal finance, providing access to cryptocurrency for retirement accounts. They’re rolling out banking-like features for Crypto investors, including crypto-backed lending.

Bulls argue that Cryptocurrencies are here to stay, so it’s only logical that the #1 company when it comes to Crypto trading in the US would grow together with the financial product it revolves around.

With the right steps they’re taking right now, and with further adoption of cryptocurrencies by the mainstream, COIN is set up for a bright crypto future.

Let’s now move on to the last bullish argument.

3) Providing Services for Institutional Customers

As of Q1 2021, COIN generates over 90% of its revenue from retail transactions, however, institutional investors are an essential part of the company’s business model.

As you can see, Coinbase institutional investors are divided into two groups, Direct Clients, which include Hedge Funds, Private Equity, Insurance Companies etc., as well as Broker Clients like Fintechs, ETFs, banks and exchanges.

They do all of that through Coinbase Prime, which is an integrated platform that provides clients with trading, custody, and prime services. With Prime, Coinbase brings all the tools and services their clients need together, providing them with a unified product experience.

Coinbase showed they mean business through acquiring various different companies that would help them in their efforts of getting into the institutional space.

The first of these institution focused acquisitions was Neutrino, which served as the basis for Coinbase Analytics.

Then they acquired Xapo, which operates cold crypto storage for institutions.

Tagomi offers many of COIN Prime’s features, including custody and brokerage services.

They also bolstered their Prime offering with Routefire and Skew acquisitions, both of which provide advanced analytical services for institutional investors.

Bulls argue that their most significant acquisition was Bison Trails, which cost them around $465. Bison Trails is a cloud-based platform providing crypto infrastructure products and services that COIN hopes to use to “help other companies build protocols and applications, helping to grow the crypto economy overall”.

If Coinbase manages to become the #1 platform for institutional investors as it is for retail investors right now, there is a lot of money to be made over the foreseeable future.

Now, before moving on to the bear arguments, let’s quickly recap the bullish points we’ve made in Coinbase.

The bulls start off with Coinbase’s strong growth numbers. Following that is their bright crypto future as the #1 retail crypto investing platform in the US. Lastly, there’s a lot of opportunity in institutional investing for Coinbase, and they are setting themselves up for success by expanding into that market.

Those were the main bullish points in COIN, but let’s now take a look at what the bears are saying…

1) Dangers of Tether

Tether is a stablecoin, a type of cryptocurrency which aims to keep cryptocurrency valuations stable.

It’s the 3rd largest cryptocurrency in the world. Tether is tied to the US dollar, meaning that 1 tether is worth $1 USD.

Investors primarily use Tether as a form of liquidation in the crypto market by converting their other cryptocurrencies into Tether, which is stable, and then liquidating them via the US dollar whenever they please.

Bears are primarily concerned about systemic problems with Tether, such as a shady background behind the founders and the entire coin, as well as a potential liquidity crisis which would endanger all cryptocurrencies, and with that, Coinbase.

Since May3rd of this year, COIN has fully accepted Tether across all platforms. In fact, Tether is crucial in that about 60% of daily Bitcoin transactions happen in Tethers.

To make things even more interesting, New York State Attorney General conducted a 2 year investigation into Tether, and had banned all New York residents from trading it.

There are also a lot of concerns behind the company that founded Tether and their owners, with financial coverups, manipulations of financial statements, uncovered reserves and liquidity, as well as existing investigations that are taking place right now, such as a criminal probe into bank fraud which was announced just a few days ago.

We also have the Fed Chief Jerome Powell making his argument against stablecoins and cryptocurrency in favor of the digital U.S. currency.

There seems to be a lot of risk involving Tether, which would negatively impact the entire crypto market, thus hurting Coinbase.

Now, with that being said, let’s take a look at the second bearish point.

2) Cryptocurrency Volatility & Uncertainty

As already noted in the bulls case, a lot of Coinbase’s future is dependent on the state of the crypto market.

But that also presents a potential negative if that same market was to tank or go down, thus negatively impacting the stock.

Such volatility and valuation of cryptocurrencies make for a volatile exchange revenue for Coinbase. This is one of the main reasons why they’re diversifying their offering so much into other products and services.

We’re seeing that happen right now with the price of Bitcoin. As Bitcoin is going up, so does Coinbase, but as soon as there’s a correction or a crash in Bitcoin, COIN investors feel it immediately.

There have also been a lot of news revolving around crackdowns on cryptocurrency activities, with such a case happening in China, where they have aggressively gone after crypto mining.

The fact that Coinbase operates in a not fully regulated environment yet is also another reason why bears are very pessimistic about its future.

Just like China, there might be other governments around the world that decide to crack down on cryptocurrencies in order to control their money supply, and if that were to happen, exchanges and brokerages would be the first to suffer since they’ll be required to comply with laws that are implemented.

While some may consider this red-tape, it’s essentially another cost that Coinbase would have to bear which would reduce their bottom line.

So, because of the uncertainty in the cryptocurrency market and the potential crackdowns around the world, Coinbase might be at great risk in the near future.

With that in mind, let’s take a look at the last bearish point, and that is...

3) Competition Concerns

In the case of Coinbase, bears argue that the business is not sustainable, as they’re enjoying a first mover advantage.

With other competitors entering the market, Coinbase will see margin pressures as competing exchanges bring down the margins on transaction fees.

For example, Robinhood offers free crypto trading, whereas Coinbase charges retail investors nearly 1.5% on average.

Although Coinbase is a giant among US crypto investors, they’re a relatively small player globally. For example, centralized exchange leader Binance is doing approximately 10x Coinbase’s daily volume.

There is also an emerging threat from decentralized exchanges such as Uniswap and Sushiswap.

As one of the biggest downside, the fact that Coinbase is an exchange and a broker, they don’t have any pricing power or other advantages against their competitors.

We mentioned Robinhood, but the additional pool of possible competitors could also include companies like Square and PayPal, which are giants in the space looking to rapidly expand into the cryptocurrency market.

As the adoption continues and the competitive space gets more saturated, there’s a high possibility that the entire industry will move to a zero-fee environment to gain more clients.

And with over 90% of Coinbase’s revenues coming from retail transactions, this poses a great threat to the company since it has no real competitive edge over other competitors.

So, those were the main bearish points in Coinbase…

Let’s now take another look at the bullish & bearish points before having Felix Frey on to give us a few different trade ideas in COIN.

Bullish Points

  • Strong Growth Numbers
  • Bright Crypto Future
  • Providing Services for Institutional Customers

Bearish Points

  • Dangers of Tether
  • Cryptocurrency Volatility & Uncertainty
  • Competition Concerns

So, that was the rundown of Coinbase, where we looked at the bullish and bearish points, but now it’s time to get Felix Frey on…

Where he’ll give us his view on the stock, lead us through the technical analysis and give us a few different options trade ideas that we can play no matter if we’re bullish or bearish…

Stay tuned, the best is about to come!

Felix Frey

Coming soon

Marko Rojnica

Thank you Felix for giving us a few different Options Trades to consider in Coinbase…

Now, if you enjoyed the video, please leave a like 

AND if you’d like to see more stock analysis just like this one… 

make sure you subscribe to the channel and turn on the bell notifications.

Also, I would love to hear your thoughts on COIN... And I’d like YOU to add to the story. Comment your thoughts & opinions on the bullish & bearish cases we’ve made… and tell us where you think COIN is going next.

Don’t forget, OptionsGeek also has a comprehensive Options education program called 3 Steps to Profit that teaches you how to Trade Options like the Top 1%.

As a bonus, you also get 1 month free of Felix Frey’s Winning Picks Premium ideas, so make sure you check the link in the description!

Get 3 Steps to Profit + 1 Month of Free Winning Picks Premium Ideas

Thank you, I’ll see you in the next one.