Analysts at Compass Point said in a report on Monday that tokenized equities are likely to represent a greater revenue opportunity for Coinbase than prediction markets, lowering their target price for COIN.
The investment bank expects crypto exchanges to announce several products at Wednesday’s event, but analysts highlighted tokenized equities and prediction markets as two areas that could help crypto exchanges. Diversification of sales Free yourself from fees for cryptocurrency transactions.
Analysts wrote that Coinbase could earn $210 million from prediction markets and $230 million from tokenized shares, although it could take years for profits to materialize. The company also reiterated its “sell” rating and lowered its price target from $266 to $230 per share.
“We do not believe that new areas will be able to offset COIN’s returns, which are sensitive to cryptocurrency price fluctuations,” the analysts wrote. “We believe investors are already paying a premium valuation for new features that may not provide meaningful returns right away.”
Coinbase stock fell more than 5% on Monday to $252, according to Yahoo Finance. The 1.7% year-to-date rise is less than Robinhood’s stock price, which soared 215% to $118 in the same period after the company introduced a similar product.
Analysts expect Coinbase to offer tokenized stocks to U.S. customers from the start. On the other hand, Robinhood’s so-called stock tokens are expanded For European users.
As Coinbase enters the competitive market among “e-brokers,” the company’s stock offering is likely to have economics similar to the flow of payment for orders, Compass analysts wrote. This means that Coinbase does not charge fees on trades, but instead earns kickbacks from market makers.
“Unless COIN stock trading offers similar benefits to traditional e-brokers, it will be difficult for users to migrate their trading from their existing platforms,” the analysts added, noting that revenue estimates are based on “rather optimistic adoption rates.”
Coinbase would earn the bulk of its revenue from prediction markets, or $200 million, by charging 1 cent for each contract traded if its service adopted a strategy similar to Robinhood and WeBull, analysts wrote. The move could also be accompanied by $10 million in stablecoin revenue in an effort to increase the USDC balance on Coinbase’s platform.
The cryptocurrency exchange earns 99% of its revenue from the assets backing Circle’s $78 billion product when stablecoins are held on Coinbase’s platform. screenshot share Information from X in recent weeks suggests that Coinbase’s product may be tapping into prediction market Kalshi.
Last month, Karshi tapped Coinbase Custody to protect users’ USDC. And last week, we added Coinbase, Robinhood, and Kalshi to our membership. formed The Coalition for Prediction Markets is an organization dedicated to establishing clear rules in this area.
