As the cryptocurrency market continues to recover impressively, it should come as no surprise to investors to see shares of centralized cryptocurrency trading platform Coinbase (COIN) take off completely.
In fact, looking at the stock chart above, the 12-month move in COIN stock has certainly been tempting for investors. For those who bought near the April lows, a nearly three-fold increase in this time frame indicates how significantly this stock can move on any type of bullish momentum in the crypto market when combined with strong institutional capital flows into this space.
Let’s dive into a big announcement Coinbase just released: the company is seeking a national trust charter from the Office of the Comptroller of the Currency (OCC) to expand its custody business. Here’s what it means for investors and why Coinbase is back on the move right now.
Coinbase’s announcement of plans to file for a national trust company is an important step. Like other players in the crypto space that have applied for banking charters or acquired companies with banking charters, the reality is that a company like Coinbase can benefit greatly from operating what is considered a federally regulated trust.
With such a charter, Coinbase has the potential to see much greater growth in its banking and custody services segments, which are becoming a more significant part of the company’s revenue and profit pie. When times are booming and everyone wants to trade cryptocurrencies, Coinbase will certainly take its cut in the form of transaction fees. But having a strong banking and custody business is important, as it will not only allow Coinbase to weather any potential storms on the horizon, but will also provide a much more stable and consistent earnings base from which COIN stock can hopefully rise over time.
If Coinbase can indeed receive the charter it seeks to expand this key segment, I think there is a lot to like about where COIN stock is positioned right now.
Looking at the company’s valuation ratios above, it’s clear that market participants are pricing in a growth slowdown ahead, at least on the earnings front. Now, some capital will need to be put to work to implement many of Coinbase’s growth initiatives (such as its aforementioned charter bid).
