TLDR
- William Blair reiterates outperform rating on Coinbase and Circle, calling the recent crypto selloff a buying opportunity rather than a warning sign
- Bitcoin’s volatility stems from immature market structure with concentrated holdings and new ETF buyers, not a breakdown of its long-term value case
- Coinbase shares rose 2.6% to $246.53 in early trading despite Circle being down nearly 80% from its 52-week high
- USDC’s stable $74 billion market cap supports Coinbase’s Subscription & Services revenue, which now accounts for 40% of total revenue
- William Blair maintains $777 million fourth-quarter S&S revenue estimate and expects higher staking yields during market drawdowns
Coinbase shares climbed 2.6% to $246.53 in early trading Monday after investment bank William Blair told investors to treat the recent crypto market selloff as a buying opportunity. The bank maintained its outperform rating on the stock despite turbulence across digital asset markets.
William Blair analysts Andrew Jeffrey and Adib Choudhury described Coinbase’s recent decline as an “air pocket” rather than a fundamental problem. They made the same case for Circle, which has fallen nearly 80% from its 52-week high even as the USDC stablecoin maintains its market position.
The analysts pointed to bitcoin’s price weakness as a reflection of early-stage market development. Concentrated holdings and a wave of first-time ETF investors have created exaggerated price swings. William Blair views these moves as growing pains that will diminish as liquidity deepens and regulatory frameworks become clearer.
Coinbase’s trading revenue faces pressure from lower market volumes. But the company continues gaining U.S. spot market share while expanding its global derivatives business. This diversification provides some cushion against volume declines.
Revenue Mix Shifts Away From Trading
The platform’s Subscription & Services revenue has grown to represent roughly 40% of total revenue. This recurring income stream has proven more stable than transaction-based earnings. USDC’s market cap remains at $74 billion despite broader crypto market weakness.
William Blair expects Coinbase to post $777 million in fourth-quarter S&S revenue. USDC rewards and staking services drive much of this estimate. Staking revenue should benefit from higher yields as users hold assets rather than redeem them during market downturns.
The company maintains flexibility through its cost structure. About one-third of expenses are variable. Management can adjust spending while continuing to invest in platform development.
Circle’s USDC Position Remains Intact
Circle’s stock performance has diverged sharply from USDC’s stability. The stablecoin continues to function as expected in cross-border B2B payments. William Blair sees Circle as a focused play on USDC growth while Coinbase serves as a broader gateway to crypto markets.
Both companies share exposure to USDC economics. The analysts expect their stocks to move in tandem over time. Circle offers a cleaner bet on stablecoin adoption in business payments.
Coinbase’s derivatives business adds another layer of revenue diversification. The platform attracts both retail traders and institutional investors. This dual customer base helps smooth out revenue volatility across market cycles.
Bitcoin’s role in investment portfolios continues to evolve. Mainstream adoption requires deeper liquidity pools and clearer rules from regulators. These developments take time in any new asset class.
The banking sector’s embrace of crypto infrastructure has accelerated this year. Traditional finance firms are building connections to digital asset markets. This institutional interest supports the long-term case for crypto exchanges.
Coinbase has positioned itself at the center of this infrastructure buildout. The platform handles custody, trading, and staking services for institutions. These B2B services generate more predictable revenue than retail trading fees.
Market structure improvements will likely reduce bitcoin’s volatility over time. ETF flows have introduced new dynamics to price discovery. Early stage inefficiencies create both risks and opportunities for patient investors.
Bernstein also maintained a buy rating on Coinbase with a $510 price target in a separate report issued November 17.
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