After a turbulent year in 2022 that shook the industry to its core, the virtual currency market is rapidly recovering. The total market capitalization is $2.7 trillion, inching closer to its previous high of about $3 trillion.
While monsters are on the rise, coinbase (coin 3.28%) He rose like a phoenix from the ashes.Top virtual currency stocks In 2023, it rose 391%. And so far this year, it's up more than 50%.
Coinbase bulls are screaming louder than ever. And I'm sure they're aiming for even bigger numbers in the long run.
Can this soaring stock price go from its current valuation of $64 billion to a $1 trillion market cap company by 2050? What needs to happen for this grand scenario to become a reality? is.
Bet on industry growth
Coinbase is one of the world's largest cryptocurrency intermediaries and exchange operators. Fees are incurred each time individual and institutional accounts trade various digital assets on the platform. Additionally, management has recently focused on enhancing its subscription and services, including staking, custody, and stablecoin activities. In 2023, Coinbase processed $468 billion in cryptocurrency trading volume. It also had 7 million monthly active users in the fourth quarter.
There are other ways this company is influencing the crypto market. Coinbase has made approximately $343 million in strategic investments in privately held cryptocurrency companies. This gives the market an economic incentive to succeed.
Perhaps more importantly, founder and CEO Brian Armstrong has emphasized the fact that Coinbase is open to regulation. This means that we are leaning towards laws related to the cryptocurrency industry and help foster discussions for regulatory clarity. Coinbase has always aimed to operate within the regulatory framework.
Based on all these factors, investors can view holding Coinbase stock as a bet on the growth of the crypto industry as a whole.
The road to $1 trillion
It is certain that the value of the cryptocurrency market will also need to increase significantly for the company to have a chance of rising 16x from now to 2050 and reaching a market cap of $1 trillion. If the price of crypto assets increases 10x by his year 2050, we have a reasonable explanation for how Coinbase could grow at a faster pace.
In this bullish scenario for the industry, Coinbase could attract more users and handle even higher trading volumes over time. Companies can then continue to monetize all assets on the platform through transaction fees, subscriptions, and services. It is possible that Coinbase will introduce new features that we cannot even imagine at the moment.
As a result, business revenues are likely to grow at a more accelerated pace compared to the overall industry value growth. Add in operational efficiencies, and Coinbase's net income should grow even faster. Additionally, with the potential to generate significant free cash flow, management may initiate stock buybacks, which could increase earnings per share (EPS). There it is.
This all depends on whether Coinbase remains at the top of the food chain, as well as the rise in the crypto market. The path to the $1 trillion goal is clear. However, there is much uncertainty as to whether this outcome will materialize.
As with any new technology, Coinbase will no doubt continue to deal with regulatory issues. Changes in the law can have a significant impact on a company's long-term success.
There is no doubt that Coinbase will face increased competition if the value of the cryptocurrency market soars. who knows? Once the industry takes off, all of the Magnificent Seven companies may shift their strategies toward cryptocurrencies. Coinbase's path will become even more difficult.
And finally, perhaps cryptocurrencies have not yet reached the level of adoption that many industry proponents hope. A lot of things need to go right for digital assets to become a bigger part of our daily lives.
So while it's possible that valuations will reach $1 trillion by 2050, it's far from certain. Investors expecting this result should temper their expectations.
Neil Patel and his clients have no position in any stocks mentioned. The Motley Fool owns a position in and recommends Coinbase Global. The Motley Fool has a disclosure policy.
