How Coinbase Benefits From Pro-Crypto Policy
Bitcoin ETF approval, regulatory clarity, and institutional adoption transformed Coinbase from speculative exchange into the $70B infrastructure backbone of digital finance
What you need
- Bitcoin ETF Custodian: Coinbase holds $30B+ in Bitcoin ETF assets (BlackRock, Fidelity custody)
- Regulatory Winner: Only major US exchange with full regulatory compliance—competitors blocked
- Institutional Moat: 95% of crypto institutions use Coinbase Prime/Custody—network effects
- Revenue Explosion: $1.8B Q4 2024 revenue (+78% YoY) as Bitcoin hit $100K+
- Staking Domination: $23B staked assets earning 12-18% yields = high-margin recurring revenue
- Verdict: Core crypto exposure (8-12% allocation) with institutional legitimacy
Table of Contents
- 1From Pariah to Partner: Coinbase's Regulatory Victory
- 2The Bitcoin ETF Goldmine
- 3Institutional Adoption Accelerates
- 4The Coinbase Moat: Why Competitors Can't Catch Up
- 5Financial Performance: The Comeback Story
- 6The Risks: What Could Derail Coinbase
- 7Valuation and Portfolio Allocation
- 8The Bro Billionaire Verdict
From Pariah to Partner: Coinbase's Regulatory Victory
In 2022-2023, Coinbase was Public Enemy #1. The SEC sued them. Congress grilled their CEO. Regulators threatened to shut down staking. The stock cratered from $368 to $31 (-92%).
Fast forward to February 2026:
- Bitcoin ETFs approved—Coinbase is the official custodian
- Clear crypto regulation passed—Coinbase is compliant, offshore exchanges banned
- Staking legitimized—SEC lawsuit dropped, Coinbase earns $800M+ annually from staking
- Stock recovered to $265 (8x from lows)
What changed? Pro-crypto lawmakers won. Regulators shifted from "ban it" to "regulate it." And Coinbase—the only major US exchange that played by the rules—emerged as the monopoly winner.
The lesson: Regulatory clarity doesn't kill crypto. It kills offshore competitors and hands the market to compliant players.
Contrarian Take
Everyone's worried about Meta's metaverse spending. They should be. But what they miss is that Meta's AI advertising engine is so far ahead, they can burn $10B yearly on moonshots and still dominate.
The Bitcoin ETF Goldmine
January 2024: The SEC approved 11 Bitcoin spot ETFs. It was the most successful ETF launch in history:
Why Coinbase Won the Custody War
BlackRock, Fidelity, and Invesco didn't pick Coinbase randomly. They picked the only option that met institutional requirements:
- Regulatory compliance: Coinbase is SEC-registered, money transmitter licensed in all 50 states
- Insurance: $320M+ crime insurance policy (vs $50M for competitors)
- Cold storage: 98% of assets offline in geographic redundancy vaults
- Track record: Zero custody breaches since 2012 (Mt. Gox died, Quadriga died, FTX died—Coinbase survived)
The Bitcoin ETF business is pure profit. Coinbase stores Bitcoin (costs ~$0), earns 0.14% annual custody fee, and benefits from trading volume as ETFs rebalance.
If Bitcoin ETFs grow to $200B AUM by 2028 (Goldman Sachs estimate), Coinbase earns $280M+ annually just from custody—before any trading fees.
Ethereum ETFs Are Next
Ethereum spot ETFs launched in July 2025. Assets under management: $12B. Guess who's the custodian? Coinbase, again.
Solana ETFs? Coming 2027. XRP ETFs? Being filed. Every crypto ETF = Coinbase custody revenue.
Institutional Adoption Accelerates
Retail crypto is fun. Institutional crypto is where the real money is.
Coinbase Prime: The Institutional Gateway
Coinbase Prime is the separate platform for hedge funds, asset managers, and corporations:
- 14,000+ institutional clients (vs 98M retail users)
- $180B+ assets on platform (custody + trading)
- $2.1T quarterly trading volume (Q4 2024)—rivaling Nasdaq crypto volume
- Average account size: $12.8M—whales, not minnows
Institutional clients generate 60% of Coinbase revenue despite being <0.01% of total users. Economics are insane:
Retail vs Institutional Revenue Per User
- Retail user: $38 annual revenue per user (ARPU)
- Institutional user: $450,000+ annual revenue per entity
Institutions are 11,842x more valuable than retail users.
Who's Using Coinbase Prime?
- BlackRock: Bitcoin ETF custody + trading desk
- Fidelity: $15B+ crypto assets serviced through Coinbase
- Millennium Management: $62B hedge fund runs crypto strategies on Prime
- Citadel Securities: Market making via Coinbase infrastructure
- Tesla: $1.5B Bitcoin purchase executed via Coinbase
- MicroStrategy: $9B+ Bitcoin holdings custodied by Coinbase
Once an institution chooses Coinbase Prime, switching costs are prohibitive. They integrate compliance, accounting, custody, and trading into internal systems. This is lock-in at enterprise scale.
The Coinbase Moat: Why Competitors Can't Catch Up
1. Regulatory Fortress
Coinbase spent $500M+ on legal/compliance since 2020. They have:
- Money transmitter licenses in all 50 US states
- BitLicense (NY)—hardest crypto license to obtain
- SEC-registered RIA (Registered Investment Advisor)
- FINRA member firm
- Partnerships with regulators (OCC, Fed, CFTC)
Offshore exchanges (Binance, Bybit, OKX) are banned from servicing US customers. Binance paid $4.3B in fines and exited the US. Kraken faces ongoing investigations. FTX collapsed into fraud.
Coinbase is the last exchange standing that can legally serve US institutions.
2. Network Effects on Institutional Side
Prime brokerage has network effects:
- More institutions → deeper liquidity → tighter spreads → attracts more institutions
- More assets on platform → better lending rates → attracts borrowers → attracts lenders
- More trading volume → better price discovery → becomes the benchmark price (Coinbase BTC price = industry standard)
You can't compete with network effects by building a better app. You have to break the network—which requires institutions to collectively switch. That won't happen.
3. Brand Trust = Priceless
In crypto, where FTX, Celsius, BlockFi, and 100+ others collapsed in spectacular fraud, trust is the moat.
Coinbase never:
- Lost customer funds to hack
- Commingled customer assets
- Operated a secret hedge fund
- Went bankrupt
- Lied to regulators
When trillions of dollars move into crypto, institutions will choose the boring, compliant, trustworthy option. That's Coinbase.
Financial Performance: The Comeback Story
Revenue Breakdown
- Transaction Revenue: $2.92B (56.6%) — Trading fees from retail + institutions
- Subscription & Services: $2.24B (43.4%) — Staking, custody, blockchain rewards, USDC interest
The shift to subscription revenue is margin expansion. Trading fees are cyclical (high when crypto booms, collapse in bear markets). Subscription revenue is recurring and sticky.
Staking: The Hidden Cash Cow
Coinbase takes a 25-35% commission on staking rewards. With $23B staked at 12-18% yields:
- Gross staking rewards: $2.76-4.14B annually
- Coinbase's cut (30% avg): $828M-1.24B annually
- Cost to Coinbase: ~$50M (software + infrastructure)
- Profit margin: 95%+
Staking alone could be worth $15-20B as a standalone business. It's pure software margin.
The Risks: What Could Derail Coinbase
Risk #1: Crypto Winter Returns
Threat: Bitcoin crashes 60-80%, trading volume collapses, retail abandons crypto again.
Impact: Coinbase revenue would fall 50-70%. Stock historically drops 80-90% in bear markets.
Mitigation: Subscription revenue (staking, custody) provides floor. Institutions don't leave like retail does.
Risk #2: Regulatory Reversal
Threat: Future anti-crypto administration bans staking, restricts ETFs, heavy-handed regulation.
Likelihood: Low but non-zero. Political winds shift.
Mitigation: Global expansion (Coinbase International serves 100+ countries). US = 60% revenue, not 100%.
Risk #3: Binance.US Comes Back
Threat: Binance resolves legal issues, re-enters US market with lower fees.
Likelihood: Low. Binance is permanently banned from US after $4.3B settlement.
Mitigation: Even if they return, institutions won't trust them after compliance failures.
Risk #4: Competition from TradFi
Threat: Fidelity, Charles Schwab build crypto platforms, disintermediate Coinbase.
Likelihood: Medium. Fidelity already offers crypto (via partnership WITH Coinbase).
Mitigation: Traditional brokers will white-label Coinbase infrastructure rather than build from scratch.
Valuation and Portfolio Allocation
Current Valuation (Feb 2026, $265/share)
- Market Cap: $70B
- P/E Ratio: 51x (trailing), 38x (forward)
- Price/Sales: 13.6x
- EV/EBITDA: 27.4x
- P/B Ratio: 6.8x
Comparable Exchanges
- CME Group: 24x P/E
- Intercontinental Exchange: 22x P/E
- Robinhood: 41x P/E
- Charles Schwab: 28x P/E
Valuation Scenarios
🐻 Bear Case: $80-120
Assumptions: Crypto winter, Bitcoin $30-40K, trading volume collapses
Revenue: $2.5B (↓52%)
P/S Multiple: 10x (market depression)
Downside: -55-70%
📊 Base Case: $250-350
Assumptions: Bitcoin $70-110K range, steady institutional adoption
Revenue: $7.2B (↑40%)
P/S Multiple: 12x (current market)
Upside: -6% to +32%
🚀 Bull Case: $500-800
Assumptions: Bitcoin $150K+, 100M+ US crypto users, global expansion
Revenue: $12B+ (↑133%)
P/S Multiple: 15x (growth premium)
Upside: +89-202%
Recommended Allocation
Conservative (3-5%)
Small satellite position for crypto exposure. Expect volatility.
Moderate (8-12%)
Core crypto infrastructure holding. Dollar-cost average over 6-12 months.
Aggressive (15-20%)
High conviction on crypto adoption. Pairs with direct Bitcoin/Ethereum holdings.
The Bro Billionaire Verdict
STRONG BUY — CRYPTO INFRASTRUCTURE KING
Coinbase is the picks-and-shovels play on crypto adoption. Whether Bitcoin goes to $200K or $30K, institutions need custody, exchanges need liquidity, and ETFs need infrastructure. Coinbase provides all three.
Why It's a Bro Billionaire Stock:
- ✅ Regulatory moat (only major compliant US exchange)
- ✅ Bitcoin ETF custodian ($30B+ assets, growing to $200B+)
- ✅ Institutional lock-in (14K+ enterprise clients, 95% retention)
- ✅ High-margin recurring revenue (staking = 95% margin business)
- ✅ Network effects (more volume → better pricing → more volume)
- ✅ Fortress balance sheet ($8.2B cash, zero debt)
Key Risks:
- ⚠️ Crypto winter = revenue collapse (cyclical business)
- ⚠️ Regulatory backslide under future hostile administration
- ⚠️ Valuation premium (38x P/E not cheap)
Action Plan:
- Entry Strategy: Buy on 20-30% dips (Coinbase corrects hard in volatility). Target entry below $230.
- Position Sizing: 8-12% of growth portfolio (higher if you hold 0% direct crypto)
- Hold Horizon: 5-7 years minimum. Crypto operates in 4-year cycles (halving-driven).
- Trim Rules: Take 25% profits if stock doubles. Let core position ride through volatility.
- Add on Crashes: Any 40%+ drop = buying opportunity if Bitcoin fundamentals intact.
Coinbase is the only way conservative institutions can access crypto. As Bitcoin becomes a reserve asset, Ethereum powers DeFi 2.0, and tokenization consumes TradFi—Coinbase sits at the center of the infrastructure stack.
The bridge between Wall Street and crypto runs through Coinbase. Own the toll booth.