Coinbase's Stablecoin Revenue Surges 31% as Benchmark Initiates Buy Rating

Benchmark Equity Research has initiated coverage of Coinbase, assigning a “buy” rating and setting a price target of $252. This move underscores Benchmark's bullish outlook on the cryptocurrency exchange, particularly in light of the growing adoption of stablecoins. According to the analyst's forecast, Coinbase is poised to benefit from the increasing institutional interest in cryptocurrencies, which is driving demand for stablecoins as a means of hedging against market volatility.

The stablecoin market has seen substantial growth, with issuers like Circle, the firm managing USDC’s $60 billion market capitalization through a partnership with Coinbase, playing pivotal roles. The regulatory landscape for stablecoins is also evolving, with Congress advancing legislation to establish a framework that would provide a pathway to legality for stablecoin issuers across the U.S. This regulatory clarity is expected to further bolster the stablecoin market, providing a stable environment for institutions to engage in cryptocurrency trading.

Benchmark's initiation of coverage with a “buy” rating reflects the firm's confidence in Coinbase's ability to capitalize on these trends. The exchange's robust platform and user-friendly interface make it an attractive option for both retail and institutional investors. As more institutions enter the cryptocurrency market, Coinbase's position as a leading exchange is likely to strengthen, driving further growth in its user base and revenue.

The increasing institutional adoption of cryptocurrencies is a key driver of the stablecoin boom. Institutions are turning to stablecoins as a means of managing risk and facilitating transactions in the volatile cryptocurrency market. Coinbase, with its established reputation and extensive user base, is well-positioned to benefit from this trend. The exchange's ability to provide a secure and reliable platform for trading stablecoins will be crucial in attracting and retaining institutional clients.

Coinbase disclosed $910 million in full-year stablecoin revenue for 2024, up 31% from a year prior. The company has historically viewed stablecoins as a way to diversify its revenue away from trading fees and categorizes them with subscriptions and services revenue. If stablecoin legislation is enacted within the next 90 days, as some members of Congress have hoped, the amount of income that Coinbase earns from assets backing USDC could soon increase if USDC’s market cap also rises.

Benchmark’s note echoes Cantor’s analysts, who said that Coinbase is “one of the best ways to play stablecoin adoption” and that “the market is under-appreciating the opportunity that stablecoins have to meaningfully displace traditional cross-border payment rails.” Based on estimates that the market value of all stablecoins could reach $2 trillion by 2035, Cantor wrote that Coinbase’s stablecoin revenue could see a “12x increase” from $910 million.

Although USDC has been lucrative for Coinbase, CEO Brian Armstrong isn’t satisfied. In February, he declared his company’s latest “stretch goal” was to dethrone Tether’s USDT, which towers over USDC with an industry-leading market capitalization. Fostering “more partnerships” will be key to accelerating USDC’s market cap, Armstrong said, adding that the firm is adding “payments support” for the stablecoin across its product suite.