Summary Coinbase has underperformed both IBIT (+59.6%) and the S&P 500 (+51.9%) since January 2024, delivering crypto volatility without the full crypto upside. Retail transaction revenue, its profit engine, faces structural erosion from Hyperliquid's DEX volumes, Binance's dominance, and secular fee compression. The two key subscription growth drivers, USDC and ETH staking, are constrained by USDT's 70% market dominance and declining staking yields of ~2.9%, respectively. At 38x FY2027E P/E versus IBKR's 27.7x and HOOD's 32x, COIN is a hold—tactically supported by rebounding crypto but lacking a re-rating catalyst. Coinbase ( COIN ) has historically been one of the few regulated and publicly listed vehicles through which institutional investors could gain exposure to the crypto space, apart from investing in Bitcoin ( BTC ) itself. Today, there are many other solid ways to get crypto exposure (even in size), so the appeal via scarcity has diminished. By investing in COIN, not only are we looking to gain exposure to crypto but also through a financial infrastructure intermediary company, which may often be an inefficient method to capture alpha in the underlying sector. Below, we can observe that the stock trades with a high correlation to crypto prices—Bitcoin in particular. However, since the inception of iShares Bitcoin Trust ETF ( IBIT ) in January 2024, COIN has in fact underperformed holding BTC via the ETF. Data by YCharts The business model Coinbase operates through two main segments—transaction revenue, and subscription and services revenue. 1. Transaction revenue accounted for $4.1B or ~56%, of total revenue in FY2025. Within this segment, Consumer contributed the vast majority (~82%), while Institutional and other transaction revenue were ~12% and ~6% of segment revenue, respectively. 2. Subscription and services revenue accounted for $2.8B or ~39%, of total revenue in FY2025. Stablecoin revenue made up the bulk of this segment at ~48%, followed by blockchain rewards at ~24%, and the rest, which included interest and finance fee income and other subscription and services revenue, added up to ~28% of segment revenue. Overall, FY 2025 total revenue reached $7.2B, growing 9% Y/Y, while adjusted EPS jumped 24.6% Y/Y to $2.19. Company A two-year lesson in capital misallocation Suppose an investor was seeking crypto exposure and was making an allocation choice in January 2024 when the iShares Bitcoin Trust was launched. Investing in IBIT would have yielded a total return of 59.6% (or 22.83% average annual return), while COIN would only have returned 38.8% (or 15.51% average annual return), losing out to SPY's 51.9% total return. This is a meaningful underperformance as investing in COIN would neither have fully captured equity growth nor the crypto beta cleanly. Instead, the investor would have been exposed to the jarring volatility associated with crypto assets while being in a margin compressed and regulated financial intermediary. The stock jumped on the inclusion into the S&P 500 in May 2025, but it proved to be fleeting as it now trades back to similar levels. Tethered to the cyclicality of crypto volumes As depicted in the chart below, crypto trading volume tends to follow closely with prices—peak volume in October 2025 coincided with peak prices in Bitcoin in the same month. Volume has since faltered, while Bitcoin has corrected nearly 40% from $126K. Coinbase relies mainly on consumer/retail transactions for fee generation, which carry significantly higher fee rates (up to 60bps). We believe fee compression is a general trend in most financial markets, and because competitors overall already have much lower blended fee rates, we see little reason for Coinbase to not lower their charges to match peers in the future. According to data from The Block, Binance still facilitates the lion's share of crypto trading volume, with ~30% of total volume in March being traded there. Bybit is second with ~7% share, while Coinbase is third at ~6% share. Coinbase's monthly market share has been mostly stable around ~5%–~6%, while other smaller platforms in aggregate have eroded Binance's market share from high 30s to 30. The Block The Block The rise in popularity of DEX A notable example would be the arrival of Hyperliquid since launching in 2023. By 2025, it had already surpassed Coinbase in notional trading volume for perpetual contracts. In 2025, it recorded $2.6T in notional trading volume, vastly superior to Coinbase's $1.4T. Total perpetuals volume reached $7.9T in 2025. According to The Block, Hyperliquid handles >6% of total exchange as of April and is on a rising trend. Year-to-date, Hyperliquid has driven $0.77T in cumulative perpetual volume, or $2.56T if annualized. The strategic response from Coinbase was its acquisition of a large centralized options trading platform, Deribit, in August 2025. Deribit processed over 80% of total Bitcoin options volume in October 2025, while the average volume share is around 70%. Deribit competes in the options segment, which is predominantly used by more sophisticated institutional clients as opposed to retail traders who prefer directional, leveraged trading in perpetuals. So, this acquisition is unlikely to resolve the disruption brought by DEX. The Block The Block Stablecoin growth still lacks clarity Coinbase's stablecoin revenue mainly rests on the USDC adoption. While being the largest regulated USD-denominated stablecoin in circulation, USDC has yet to make enough headway to dethrone its much larger brethren, USDT. According to DefiLlama , USDT in circulation is $188.5B (~70% market share) versus USDC's $77.9B (~29% market share), as of April 22. Despite the regulatory tailwind, USDT still has its first-mover and liquidity advantage, particularly driven by demand across Asia and Africa. The recently advanced Digital Asset Market Clarity Act has yet to provide enough clarity on stablecoin law, especially when it comes to yield. As of now, issuers like Circle are prohibited from paying USDC holders any interest. But, providing incentives linked to digital asset activity appears to be the workaround for now. There is still ongoing debate as to whether such rewards should be classified as interest. But for Coinbase, there is meaningful revenue implication. Stablecoin revenue rose 48% Y/Y in FY2025 and relies on USDC adoption to be successful. Without offering interest or incentives for holding or using USDC, adoption could falter and directly impact the company's revenues. Blockchain rewards facing compression Participation in the blockchain often rewards staking yield, which has helped contribute $677M in revenue for Coinbase in FY2025, down 4% Y/Y. Most of the staking yield should come from Ethereum, which has generally offered low to mid single-digit yields post-Merge. Currently, ETH staking yield sits at ~2.9%, according to Staking Rewards . Similarly, the BlackRock ETHB staking ETF offers a 2.8% yield, as of February 18. The yield can fluctuate depending on network activity and, most importantly, the staking participation rate. Liquid restaking introduces enhancements to plain-vanilla ETH staking by offering layered yield strategies. These strategies can carry additional risk but can offer varying degrees of incremental yield. Sophisticated users may opt to move away from Coinbase's staking platform to self-directed LRT protocols in search of higher yield. However, we have observed that yield spreads on LRTs have materially declined to ~1%. Declining operating leverage Total revenue in 4Q25 fell 22.2% Y/Y, while transaction revenue dropped 36.8% Y/Y to $982.7M. But operating expenses rose 41% Y/Y to $1.3B as headcount grew 3% Y/Y on top of surging SG&A and R&D expenses. The market predicts capex to reach $144M in FY2026E and rise to $159M in FY2027E, from virtually zero in FY2024 as a result of the Deribit acquisition and infrastructure investment. This should weigh on FCF in the coming years. Valuation and verdict If we look towards the outer years in FY2027E/FY2028E, both revenue and EPS noticeably improve. The market is discounting FY2026E with modest declines in revenue and a larger drop in EPS due to reverse operating leverage. The year has started lackluster in 2026, correcting from a peak in October 2025. But crypto assets have meaningfully rebounded from March lows, helped by fresh highs in U.S. equities and optimism from a potential resolution of the U.S.-Iran conflict. That said, the stock trades at an FY2027E P/E of 38x and an FY2027E EV/EBITDA of 13.9x. Compared with its broker peers, IBKR trades at 27.7x FY2027E P/E, while HOOD trades at 32x FY2027E P/E. Coinbase is more richly valued, but this is a premium that is increasingly difficult to justify. While COIN has built a strong moat around regulated crypto dealing, its retail business, from which it makes most of its profit, has come under intense competition. On the other hand, we believe its institutional franchise is a bright spot where the company serves as a crypto asset custodian for many institutional products. On balance, we think COIN is a Hold until valuations or fundamentals improve. In the near term, it is likely to benefit from rebounding crypto assets. Metric FY 2024A FY 2025A FY 2026E FY 2027E FY 2028E Revenue (Adj.) $6,564M $7,181M $6,976M $8,394M $8,740M Revenue YoY % +111.2% +9.4% -2.9% +20.3% +4.1% EBITDA (Adj.) $3,348M $2,808M $2,463M $3,466M $3,687M EBITDA Margin 51.0% 39.1% 35.3% 41.3% 42.2% EPS (Adj.) $9.48 $4.45 $3.18 $5.14 $6.05 EPS (GAAP) $9.48 $4.45 $2.92 $5.37 $6.40 Source: Company, market estimates, Himalayas Research estimates