During the past three months, the actions of Global Coinbase (NASDAQ: COIN) are up nearly 20% after days of massive selling compared to its overvalued initial public offering. Most of the skepticism surrounding the stock market stems from its overreliance on trading fees. Coinbase is a brokerage platform for buying, selling, and transferring cryptocurrencies and primarily relies on trading commissions for its income.
Despite huge growth, the cryptocurrency brokerage industry strives to offer the best price available to consumers for investing in cryptocurrencies, thereby reducing margins. But luckily, Coinbase realizes this and is branching out into an area with huge potential. So let’s see why the stock is a solid buy for investors.
The rise of blockchain analytics
In recent years, Malicious Ransomware as a Service (RaaS) has grown tremendously, with more than 4,000 cyber attacks occurring daily in the United States. What’s more, hackers’ appetites have soared, with multi-million dollar ransom demands. In May, the hack of a major pipeline disrupted services and forced its operators to finally cough up the ransom. These funds were eventually found.
This brings up the main topic: cryptocurrencies, such as Bitcoin(CRYPTO: BTC), are now the preferred medium of exchange for hackers to demand ransom from victims in order to unlock their computers. With blockchain analysis, Coinbase can play a vital role in their research. It works by comparing hackers’ wallet addresses to those in your Know Your Customer (KYC) information stored in its database and identifying them to law enforcement. It’s a move that can restore confidence in the cryptocurrency community.
In addition, the same tactics are now applicable to stop illicit activities. Wallets linked to merchants who sell items like illegal guns or narcotics can be blacklisted. It can also reveal the identity of criminals doing business with them if they are Coinbase customers. In addition to this, since most cryptocurrencies have a public ledger, the company can also trace the flow of funds to and from wallets suspected of engaging in practices such as tax evasion. Although small, Coinbase has secured a few contracts with government agencies like the IRS and the Secret Service, with additional interest from Immigration and Customs Enforcement.
Ultimately, keep in mind that Coinbase stock is backed by strong fundamentals, unlike most cryptocurrencies themselves. In the second quarter of 2021, revenues and profits increased by 1,040% and 4,918% respectively, to reach $ 2.033 billion and $ 1.606 billion. Its finances are quickly catching up to the company’s $ 56.32 billion market cap. There are now 83 cryptocurrencies traded on Coinbase (the 13th largest digital currency exchange in the world by volume), up from 54 in the first half of 2020.
The company has an ambitious goal of convincing over a billion people to trade cryptocurrencies, and it has developed a smart way to do so. Users can watch educational content on his platform and earn cryptocurrency for their time – something that he could easily rename to attract advertisers to his platforms. About 2.3 million users participated in one of its learning campaigns during the second quarter.
Additionally, his latest venture is to take a step into cryptocurrency borrowing and lending, which has grown into a multi-billion dollar industry. Using this setup, investors pledge their tokens to take out a low-interest asset loan to cover their expenses while their capital continues to accumulate.
Overall, Coinbase is moving fast, as are the cryptocurrencies themselves. I would expect its new ventures, particularly blockchain analysis, to do more than make up for its growth deficits if the volume of transactions declined. This makes it a top cryptocurrency stock to check out now.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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