Coinbase: Is the Recent Selloff a Strategic Entry Point for Long-Term Investors?

The recent selloff in Coinbase (COIN) has sparked a critical debate: Is this a buying opportunity for long-term investors, or a warning sign of overvaluation? As the crypto market grapples with volatility and structural recalibration, Coinbase's fundamentals and strategic positioning offer a compelling case for value investors. Let's dissect the numbers, market dynamics, and institutional sentiment to determine whether the dip is a chance to buy the future of digital finance at a discount.

Resilient Revenue Streams and Strategic Expansion

Coinbase's Q3 2025 earnings report paints a picture of resilience amid crypto's turbulence. Total revenue hit $1.9 billion, driven by a 37% sequential surge in consumer spot trading volume ($59 billion) and a 30% jump in consumer transaction revenue to $844 million. Institutional transaction revenue also soared 122% to $135 million, largely due to the Deribit acquisition which expanded Coinbase's derivatives capabilities.

The company's subscription and services segment, a key growth driver, grew 14% to $747 million, with stablecoin revenue playing a pivotal role. USDC balances on the platform averaged $15 billion, contributing to the stablecoin's $74 billion market cap-a record high. Stablecoin-related revenue alone reached $355 million, underscoring USDC's role as a critical payment and settlement tool.

Coinbase's "Everything Exchange" vision is gaining traction, with DEX integrations unlocking access to over 40,000 assets in the U.S. and assets under custody hitting $300 billion, fueled by Bitcoin and Ether ETF inflows. These metrics highlight a diversified revenue model less reliant on crypto price swings and more on recurring, fee-based income.

Market Dislocation and the October 10 Deleveraging Event

The October 10 deleveraging event-a sharp selloff in altcoins and decentralized platforms-exposed structural weaknesses in crypto's liquidity. While Bitcoin and Ethereum held up better, the event forced a market reset, reducing leverage to healthier levels. For Coinbase, this dislocation created a buying opportunity for long-term investors.

As noted by a Coinbase Institutional report, the selloff "restored leverage levels to structurally healthier conditions" and could set the stage for a gradual recovery. Institutional investors, insulated from the deleveraging due to low leverage and a focus on large-cap assets, remain bullish. A 2025 survey by Coinbase and EY-Parthenon found that 75% of institutional investors plan to increase crypto allocations in 2025, with 59% targeting over 5% of assets under management. This demand for compliant infrastructure positions Coinbase as a critical onramp for institutional adoption.

Valuation Concerns and Value Investing Metrics

Critics argue Coinbase's valuation remains stretched. Argus downgraded the stock to Hold, citing a 39x 2026 earnings multiple-well above peers like ICE and Nasdaq. Forbes notes a P/E of 58.1 and P/EBIT of 51.1, suggesting overvaluation. However, post-selloff metrics tell a different story.

Coinbase now trades at 21.5x earnings, lower than the peer average of 32.7x but still above its fair ratio of 19.6x. While not a screaming bargain, the selloff has narrowed the gap between price and fundamentals. For value investors, this represents a discount to Coinbase's long-term potential, especially given its leadership in building compliant, institutional-grade infrastructure.

Rising Expenses and Regulatory Headwinds

No investment is without risks. Coinbase faces rising expenses from M&A activity, headcount growth, and regulatory compliance. Argus analysts revised 2025 and 2026 EPS estimates to $7.80 and $6.55, respectively, reflecting slower growth expectations. However, these costs are investments in a future where crypto is mainstream. The company's Q3 earnings-up 488% year-over-year in EPS to $1.50-demonstrate its ability to scale profitably despite macroeconomic headwinds.

The Case for Buying the Dip

For long-term investors, the selloff offers a chance to buy a company with a moat in digital asset infrastructure at a discount to its intrinsic value. Coinbase's USDC exposure, recurring revenue streams, and institutional adoption story are structural tailwinds. While valuation concerns persist, the company's earnings growth and market leadership justify a premium.

Institutional sentiment reinforces this view. Brett Tejpaul of Coinbase Institutional argues that crypto is becoming a "core component of modern investment portfolios," driven by regulatory clarity and stablecoin utility. With assets under custody at $300 billion and a roadmap that includes tokenization and global expansion, Coinbase is positioned to benefit from the next phase of crypto adoption.

Conclusion

The recent selloff in Coinbase is a classic case of market dislocation-a buying opportunity for those who can look past short-term volatility. While valuation metrics remain mixed, the company's resilient revenue streams, strategic expansion, and institutional tailwinds make it a compelling long-term play. For value investors, the key is to focus on the future: a world where crypto is as integral to finance as stocks and bonds. Coinbase isn't just a crypto exchange; it's the bridge to that future.