Bitcoin (BTC-USD) has fallen more than 10% since the Securities and Exchange Commission approved spot Bitcoin ETFs. One company that is exposed to the ups and downs of the crypto market is Coinbase (COIN).
Owen Lau, Executive Director at Oppenheimer, talks to Yahoo Finance about the state of Bitcoin and the impact it can have on financial institutions, investors and the crypto market itself.
When asked how the price of Bitcoin affects Coinbase, Lau says: “I would say that is one of the most important factors right now. The other important factor is that they file a lawsuit with the SEC. So there is still regulation.” Overhang. We still do not have clear regulations in the United States at this time, although there is more clarity outside the United States. “So I want to highlight the Bitcoin price, the SEC lawsuit, and I think the overall health of the industry are all important factors for Coinbase.”
For more expert insights and the latest market activity, click here to watch this full episode of Yahoo Finance Live.
Editor's Note: This article was written by Nicholas Jacobino
Video transcript
[AUDIO LOGO]
JOSH LIPTON: Bitcoin continues to see declines and is currently trading at around $39,000. Optimism about spot Bitcoin ETFs is fading. And the declines are also hitting crypto-related stocks, including Coinbase. Joining us now is Owen Lowe, Oppenheimer Executive Director and Senior Analyst. Owen, nice to see you. Some of your colleagues, Owen, are making headlines today. They are becoming a bit pessimistic and skeptical about Coinbase. And their concern here as they watch Bitcoin, they watch these Bitcoin spot ETFs, Owen, maybe some sort of sell the news event. Do you share this caution here, Owen?
OWEN LAU: So first of all, thank you for having me. I think the stock could be volatile in the short term because if you look back at Coinbase, the stock is up 400% in 2023. And Bitcoin price has also risen sharply and there has been a “sell-the-news” event that takes place after the spot approval of the Bitcoin ETF. I think there could be some bearish momentum in Bitcoin in the short term until the next catalyst. So I would say that in your opinion the stock is probably going to be quite volatile for Coinbase in the short term.
The story goes on
JULIE HYMAN: Owen, is Bitcoin price the most important factor in Coinbase's stock price?
OWEN LAU: I would say this is one of the most important factors at the moment. The other important factor is that they are filing a lawsuit with the SEC, so there is still a regulatory overhang. Currently, there are still no clear regulations in the United States, although there is more clarity outside the United States. Therefore, I would like to point out that the Bitcoin price, the SEC lawsuit, and in my opinion the overall health of the industry are important factors for Coinbase.
JOSH LIPTON: And Owen, I'm also interested when we talk about Coinbase, the business, and you look at the non-trading revenue, Owen. What percentage of this is the total? And how do you see this evolving from here? Because obviously they've placed a lot of emphasis and priority on diversifying the business, right?
OWEN LAU: Yes, at the end of the third quarter I would say that around 50%, half of the revenue, came from non-trading. And that revenue came from interest income and also blockchain revenue, so the revenue that they earned from the USDC stablecoin. You have a revenue share agreement with Circle.
And then the other smaller income items are the staking income and also the deposit income. So you're right that Coinbase has made a big effort to diversify beyond just trading. That's why Bitcoin is important, but not the – I wouldn't say it's like just one Bitcoin – because only Bitcoin is the predominant factor, so to speak.
JULIE HYMAN: And then if we also look at the Bitcoin ETFs, right? There has been a lot of debate leading up to whether this will be a boon or neutral or even negative for Coinbase. Now that the launch is over, what do you think?
OWEN LAU: So if we look at the trading volume in the fourth quarter. So when we factor in a lot of the optimism of Bitcoin and the approval of the Bitcoin ETF, I think there are two important things that not many people are talking about. Firstly, the price of Bitcoin has risen sharply. And Coinbase's January revenue is based in part on the price of Bitcoin.
The second part was about higher trading volume. So this means that this Bitcoin ETF can attract new investors, support higher prices and also support higher trading volume. This actually benefits Coinbase in the long run. So I think it's a net positive for Coinbase in the longer term because it attracts new investors.
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