Summary Coinbase remains highly sensitive to Bitcoin price movements, with trading volumes and share price closely correlated to crypto market sentiment. Coinbase faces significant headwinds from declining retail trading volumes, heightened competition, and a shifting retail investor landscape. The company is pivoting toward high-margin, recurring services revenue, which now contributes $2.83 billion in revenue, offsetting transaction declines. Despite services growth, Coinbase's risk profile and operational challenges make Bitcoin a safer bet for bottom-fishing than the stock itself. Investment Thesis Coming into 2025, Bitcoin and the broader market were declining, and then we saw prices bottoming in the first week of April, followed by a healthy correction. We're seeing the similar trend coming into 2026; however, the broader market seems to be holding up pretty well while crypto prices continue to witness massive drawdowns. Year-to-date, the ( SPY ) is up 0.5%, while Bitcoin and Coinbase ( COIN ) lost 21% and 27% of value, respectively. Coinbase's price trades closely to Bitcoin's price but with a higher volatility, as it is perceived to be a more risk-on asset compared to Bitcoin given the management and the operational risk embedded in the equity. The reason for the strong correlation between two assets has to do with crypto trading volume. Generally, when the Bitcoin price appreciates, we witness more trading activity among exchanges, which translates to more volume and more revenue. The opposite occurs when Bitcoin drops. Data by YCharts YoY, COIN lost 48.68% of its value, while Bitcoin lost 32.83%, and the S&P returned 14.23%. For the knife-catchers, the way to play the trade would be to buy Coinbase, as it's the stock that could witness steeper upside in the case of an industry correction. I wouldn't recommend such a trade for conservative investors like myself, as I see structural headwinds that limit the upside potential. If you want to play the "This could be the bottom" game, I think Bitcoin is a safer asset; hence, I'm rating COIN a hold. Bear Case The main bear case for Coinbase is that the firm still sources the majority of its revenue from retail trading volume. This is the business segment that has been in a cyclical decline since the peak of 2021. Institutional trading has also been in a decline but is slowly returning to the same level as in 2021. From Dec. 2021, retail trading volume decreased 55%, from 535 billion to 239 billion, and institutional trading volume only decreased 14%, from 1.14 trillion to 982 billion. The YoY growth rate in 2021 was over 600% for retail trading and over 700% for institutional trading; the second peak was witnessed in December of 2024, at 198.67% for retail trading and 145.55% for institutional trading. As of the last quarter, the retail growth rate is at 6.70%, and the institutional growth rate is at 1.76%, with signs of dipping into the negative territory as crypto activity continues to slow. Consumer vs. Institution volume (Stock Analysis) There are two reasons why Coinbase witnesses these volume declines, especially from the retail side. The first reason is that Coinbase still charges retail a higher take rate compared to its institutional client, 1.50% vs. 0.05% as of the last quarter. This opens a room for competitors like Robinhood ( HOOD ) and Hyperliquid to take some of its retail base by offering lower transaction fees. According to Artemis Analytics , Coinbase, in line with Robinhood, charges a take rate well above 1%, while Hyperliquid charges below 0.1%. As a result, Hyperliquid has recently surpassed Coinbase in trading volume, proving that retail is willing to switch service providers to reduce costs, especially now that most crypto portfolios are in the red. I see this headwind not as cyclical but structural; what's only offsetting the decline is the slow adoption of DEX in the US due to lack of regulatory clearance. Take rate vs. Trading (artemisanalytics.com) The second reason is that crypto is losing retail market share to other trading/gambling avenues like sports betting, options, and prediction markets. Crypto has few use cases outside of trading, namely, cross-border payments and remittances, but trading still accounts for the majority of the use cases. The problem with trading as a use case is that the demand side is very fickle; once opportunities to make easy money disappear, so do the participants. To address this problem, Coinbase has decided to shift its mission from being a crypto gateway to being an " everything exchange " that will facilitate all kinds of trading on one platform. These are mostly matured markets with fierce competition, so for Coinbase to execute a good go-to-market strategy, it will have to get into an acquisition spree of smaller players that have already achieved product-market fit, e.g., the acquisition of Deribit, introducing capital and managerial risks into the equity. Consumer vs. Institutional Revenue (Stock Analysis) Bull Case The bull case for Coinbase is that the firm is relying less and less on trading volumes as the source of revenue and is growing its services segment, which brings high-margin recurring revenue. The impact of the services revenue on the top line is already apparent. Looking at the trading volume and the transaction revenue charts, we can see that the rebound from the 2023 bottom was subtle; however, Coinbase revenue rebounded significantly, and the main driver of the rebound was subscription and services revenue, which has been steadily increasing over the years. In December 2021, Coinbase revenue peaked at $7.84 billion on a TTM basis, with $6.84 billion coming from transaction revenue and $517.49 million coming from services revenue (7% of revenue share). As of the fourth quarter of 2025, TTM revenue is at $6.88 billion, with $4.06 billion coming from transaction revenue and $2.83 billion coming from services revenue (41% of revenue). Transactional vs. Services Revenue (Stock Analysis) One headwind that is likely to face the services segment is that, as of the last earnings result , stablecoin revenue accounted for 48% of total subscription and services revenue, making this segment highly sensitive to interest rate changes. Given that there's a higher expectation of the Fed cutting rates in the coming years, this could impact Coinbase's topline growth. Services revenue segment (Q4 2025 investor letter) Financial Analysis Q4 2025 Income Statement Looking at the last earnings result, Coinbase's revenue declined 22% YoY to $1.781 million, missing estimates by $46.1 million. This double-digit decline was caused by retail revenue decreasing 46% to $733.88 million and block rewards revenue decreasing 29% to $151.63 million. Offset by institutional revenue growing 31% to $184.95 million and stablecoin revenue growing 61% to $364.13 million. Aggregate transactional revenue declined 37% to $982.65 million, and services revenue increased 13% to $727.39 million. Q4 2025 Revenue segment results (Analyst Chart, SEC Fillings) Transactional expenses decreased 31% to $218.63 million, resulting in gross profits declining 20% to $1.56 billion and landing gross margins at 87.7%. Operating expenses increased 40% to $1.29 billion, resulting in operating income decreasing 74% to $273.75 million and landing EBIT margins at 15%, below the sector median of 24%. Finance expenses increased 103% to $1.16 billion, largely influenced by the price depreciation in crypto assets held on the balance sheet, which resulted in an operational loss of $886.31 million. Q4 2025 Income Statement (Analyst Chart, SEC Fillings) Full-Year 2025 Income Statement Looking at the 2025 full fiscal year, transaction revenue increased 2% to $4.06 billion; the revenue growth was offset by retail revenue decreasing 3% to $3.32 billion. Services revenue increased 23% to $2.83 billion, bolstered by stablecoin revenue increasing 48% to $1.35 billion. Overall, total revenue increased 9% to $7.18 billion. 2025 Revenue segment results (Analyst Chart, SEC Fillings) Operating expenses increased 41% to $4.73 billion, bolstered by the sales and marketing budget increasing 62% to $1.06 billion, resulting in operating income decreasing 38% to $1.44 billion, pretax income decreasing 48% to $1.52 billion, and net income decreasing 51% to $1.26 billion. Bulls would say these margin contractions are cyclical, and once crypto markets correct, margins will expand again. I see this as a structural headwind given the maturation of the crypto space, inviting more competitors offering lower take rates to retail. 2025 Income Statement (Stock Analysis) Valuation For the first quarter of 2026, analysts estimate revenue to be at $1.59 billion , implying an 18% revenue decline relative to the prior year quarter and further margin compression to the bottom line. I find these estimates to be fair, as bear markets tend to last more than 3 quarters. Given the structural headwinds I listed, Coinbase still trades expensively relative to its sector median, given the D- rating; however, most of its industry peers are concentrated in the F rating, proving that the premium valuation is not only idiosyncratic to Coinbase but also a broader industry mispricing. Valuation factor (Analyst Chart, Seeking Alpha) Conclusion Even though COIN closely tracks the price of Bitcoin, unlike Bitcoin, the headwinds for the firm are more structural and less cyclical, and it seems that the markets have priced this in, given the massive drawdown witnessed. Even if crypto markets recover, I am highly skeptical that this will immediately turn bullish for Coinbase as they continue to lose market share of retail trading amid the risks of rate cuts for that services business. I don't expect further drawdowns, as I think the stock has received enough market punishment, but I also don't see a massive correction for 2026; hence, a neutral position on this name is warranted.