Coinbase global ( CHANGE -1.52% ) recently announced some of the largest year-over-year gains ever seen in a company’s first year as a publicly traded company. As has often been the case in 2022, the stock market was unimpressed and in fact drove the stock down.
The cryptocurrency exchange generated 544% more revenue in 2021 compared to 2020 and it was not starting from a low point. Total revenue reached $7.4 billion last year.
Cryptocurrency exchange did well in 2021, but Bitcoin fell about 17% since the start of 2022. In addition to falling cryptocurrency prices, investors were not happy with expectations of the company on the downside Despite the unsettling volatility, investors have a big reason to remain optimistic about the future of Coinbase. Seven words from the company’s CEO, Brian Armstrong, could mean billions down the road for Coinbase and its shareholders.
No longer just traders
Bitcoin’s volatility is worrisome now but not necessarily a reason to avoid Coinbase. During the company’s fourth quarter earnings call, Armstrong highlighted the main reason to look beyond temporary ups and downs and focus on the long term. He reminded everyone that “we now have major use cases” and not just rampant speculation from fickle traders.
After seeing wacky digital artworks sell for seven-figure sums, not rolling your eyes at the mere mention of non-fungible tokens (NFTs) is a challenge. Here’s one reason I try to keep my eyes under control. Last year Coach handbags and Nike sneakers began to arrive with corresponding digital versions of certain products. It won’t happen in 2022, but it’s only a matter of time before most consumers expect the products they view in the real world to come with NFTs they can view. in the metaverse.
In addition to NFTs, the number of new financial services made possible by decentralized blockchain technology, or DeFi, is exploding. Fintech companies are constantly finding new ways to automate the creation of new checking accounts, loans, and insurance policies. Currently, nearly $200 billion worth of crypto assets are at work in a DeFi instrument.
If you want to participate in almost anything cryptocurrency, you need a wallet. There is already an endless array of different wallets with various functions, but chances are the Coinbase wallet will be one of the most popular options for a long time to come. The company plans to spend at least $4.25 billion on technology and development this year and keeping customers connected to its portfolio with increased features and functionality is a top priority.
Coinbase’s investments are paying off at a mind-blowing rate. The number of unique wallets making at least one transaction per month has increased more than tenfold over the past year to over 900,000 in January.
It’s time to buy
You might be surprised to learn that the stock market doesn’t think Coinbase can continue to grow at a fraction of the rate the company announced in 2021. Right now, you can buy the stock at the shockingly low price of just 16x profits.
Last year was a huge year for cryptocurrency trading that will likely not be matched this year. Coinbase’s bottom line will most likely contract in 2022, but long-term shareholders could be well rewarded. In a few years, millions of people who didn’t know a blockchain from a hole in the ground could start transacting regularly with a Coinbase wallet.
Coinbase’s huge resources don’t guarantee that its wallet will retain a significant share of a rapidly growing market, but its chances look pretty good.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.