Key insights
- The author argues Coinbase is well-positioned to benefit from the growth of stablecoins by becoming a key infrastructure provider for digital payments. Its Base network and institutional services create a competitive advantage. Proposed legislation restricting interest payments on USDC is a risk, but may not significantly impact stablecoin adoption. Overall, the analysis suggests a moderately bullish outlook for Coinbase due to its role in the evolving digital economy.
What follows is in short, my thesis for why Coinbase could be a big winner with stablecoins in the future and why I think it may be fairly valued.
For my full thoughts, click here: https://open.substack.com/pub/mulberryfinancial/p/why-gold-is-falling-and-why-the-banks?utm_source=share&utm_medium=android&r=4af6n2
The legacy financial system is a "black hole" where international wires take days and cost up to 7% in hidden fees. Stablecoins are the fix. By putting the US Dollar on the blockchain, you get 24/7, instant global settlement at a fraction of the cost. Stablecoins are a fundamental upgrade to how money moves globally.
Coinbase is positioning itself as the "Operating System" for this new digital economy. Here’s why the bull case is structural, not just cyclical:
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The New SWIFT: Coinbase is building the infrastructure (like the Base network) that allows giants like J.P. Morgan, Visa, and Mastercard to move money instantly.
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Infrastructure Moat: Through Base (Layer-2), they’ve created a fast, low-cost ecosystem that is becoming the primary rail for stablecoin payments.
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Institutional Lock-in: Their "Prime" services and regulatory trust create high switching costs. Once a bank integrates with Coinbase’s rails, switching costs become high.
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Banks Know they're Losing: Last week, after much lobbying from traditional banks, U.S. Senators proposed changes to the GENIUS act that will not allow Coinbase and others to pay interest or "interest-like" payments/yield to users simply for "holding" USDC, although they are still allowed to pay rewards for things like using th coins. The banks argue that USDC could compete with traditional banks deposits causing banks to lose deposits. In fact, USDC does compete with bank deposits and pays significantly higher yield or rewards right now. The market is selling Circle and Coinbase, but the impact might not be that large to stablecoin adoption if these changes are enacted. In fact, this legislation might actually drive stablecoin PAYMENT adoption even more. That is it Coinbase pays rewards for each transaction, similar to credit cards.
The Bottom Line:
Coinbase’s 18% net margins and its pivot to becoming the essential middleware for global finance open the company up to a massive total addressable market. It’s a bet on the plumbing of the financial system, and regulatory changes have caused the stock to drop significantly.