Although Coinbase (NASDAQ:COIN) stock has yet to recover from its post-initial public offering slump, investors are warming up to the cryptocurrency platform.
Investors seeking exposure to the advantages of cryptocurrency without buying them may consider COIN stock, but the benefits of investing in Coinbase do not stop there.
The company is a leader in the cryptocurrency space. It has a rock-solid balance sheet. If crypto maintains its relevancy as a store of value and as a means to complete transactions, then the Coinbase platform value will rise.
In the near term, volatility in Bitcoin (CCC:BTC-USD) will help Coinbase shares rise. Users tend to trade the currency more often when prices gyrate. In the second quarter, Chief Financial Officer Alesia Haas said that volatility is a heavy influencer on Coinbase’s transaction revenue. The company cannot forecast transaction revenue by looking at quarterly results. Instead, shareholders should look at yearly trends.
As the U.S. implements its Infrastructure Bill, Coinbase should hope for policymakers to look at the crypto technology favorably.
At least 20 million Americans have crypto. To protect their holdings, Coinbase executives would benefit by actively participating in the policy efforts.
Coinbase is at the center of the crypto movement. It is actively educating users to build user trust. This strategy will pay off in the long term. New users will create a Coinbase account instead of joining other platforms.
Coinbase invested in the Crypto Council for Innovation, a global alliance of crypto industry leaders. Its purpose is to show what crypto can do and to advocate its benefits to the government. Its participation is bearing fruit.
People treat Coinbase on a level playing field compared to other traditional financial services firms. Coinbase took it a step further by actively engaging with the government before issues came up. Expect policymakers to look first at the opportunities that Coinbase offers, followed by its risk mitigation strategies when things potentially go wrong.
The Downside to COIN Stock
Despite its efforts in minimizing problems, Coinbase does not have a perfect record. CNBC found thousands of customer complaints against the company.
For example, the company relied primarily on email. This left customers with the difficulty of reaching representatives. If the company wants to exponentially improve customer service levels and resolve hacking issues, it will need to hire more support staff. It will also need to invest in its technology to roll out more support channels.
Coinbase posted $462 billion worth of volume traded and has 2,100+ employees. As trading volumes grow, it will still need more staff.
On Sept. 14, Coinbase announced the sale of $2 billion worth of debt. It will use the funds for general corporate purposes, including product development. Those projects may take longer than expected to finish or may cost more than initially planned for.
Coinbase also said it might use the cash raised for potential investments or acquisitions of other companies. It risks overpaying for products or companies if the target demands a high price thanks to the hot crypto market.
Fortunately, Coinbase completed 17 acquisitions and has the experience of integrating them into its operations.
On Wall Street, 15 analysts offer an average price target of $350 on COIN stock. According to Tipranks, the lowest price target is $220 and the highest is $500.
Investors who are bullish on the value of Bitcoin are better off buying the above-mentioned mining firms. Conversely, those who want to invest in the growing volatility of the digital currency should consider Coinbase stock.
Coinbase is the “go-to” cryptocurrency platform for people around the world, but users have smaller, unproven exchanges to consider, too.
The site appears to offer the highest security and support. Coinbase still has some small customer support issues to work out. After the debt offering, it has more funds on hand to invest in the business and to increase staff levels.
As customer satisfaction levels rise, Coinbase will attract more customers.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.