Cryptocurrency asset manager Bitwise has recently shared analysis on the Nasdaq-listed cryptocurrency exchange Coinbase (NASDAQ: COIN), suggesting it could be in a similar position to Amazon before it exploded and became a near $2 trillion company.

According to Bitwise’s analysis there’s a “game-changer hidden in Coinbase’s recent earnings report,” namely its Ethereum layer-2 network Base that allows users to move funds on Ethereum Virtual Machine (EVM) compatible decentralized applications for next to no cost.

Coinbase reported net revenue of $1.6 billion in the first quarter of the year, seeing a rise of 72% quarter-on-quarter and 116% year-over-year, beating analyst estimates of $1.36 billion. Its trading revenue, on a quarter-on-quarter basis, rose 93%, while institutional trading revenue rose 105% and stablecoin revenue 15%.

Its blockchain rewards revenue rose 59% over the same period, with the firm’s total profits hitting $1.2 billion while total cash on hand rose to $7.1 billion. To Bitwise’s analysts, a “little-noticed crypto-native business line” they believe could be a game changer is Base itself, which account for 1% of the firm’s revenues in the first quarter.

They noted that when “something is much cheaper, faster, and easier to use, people are going to use more of it,” and added Base is the “fastest-growing Layer 2, with transactions rising 74% quarter-over-quarter in Q1.” Base, they added, processed 40% more transactions in April alone than in the whole first quarter, while Coinbase’s CEO Brian Armstrong said the number of developers on it is surging.

As a result, Bitwise added, Base could be a “massive revenue generator for Coinbase, with extremely high gross margins.” Coinbase is a “sequencer” verifying transactions on the Layer-2 network, which batches them before posting them to the Ethereum mainnet.

Coinbase is the only sequencer on Base for now and as a result pocketed $15.5 million in fees in the first quarter of the year, out of $27.4 million Base users paid in transaction fees to use the network. In April, those fees accounted for $11 million of Coinbase’s revenue.

The analysts added:

If Base continues to grow, it could reliably deliver $10 million, $20 million, or more in profit to Coinbase each month. In the longer term, if Base becomes the primary network on which developers build applications, Coinbase could end up owning a core piece of crypto infrastructure. 

Bitwise further noted that some noted “this could put Coinbase in a similar position to Amazon,” as Amazon started off with selling books online before expanding, and now over half of its profits come from its cloud computing service Amazon Web Services.

Similarly, Coinbase could become a core infrastructure provider within the cryptocurrency ecosystem.

Also read: How to Transfer Crypto From Binance to Coinbase: A Step-by-Step Guide

Featured image via Unplash.

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