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Reinvigorated trading activity is returning to Coinbase, stoked by Bitcoin’s recent climb over $100,000 and a fresh interest in alternative cryptocurrencies. This flurry of activity has led investment bank Needham & Co. to increase its price target for the company’s stock to $420 from $375 while keeping a “buy” rating.
Analyst John Todaro points to the optimism coming from the performance of Coinbase’s December trading volumes, which are on pace to beat past highs. And while the firm said trading activity dropped in Q3, as Bitcoin prices remain low, along with the wider economy, the final quarter of 2024 seems to paint a different picture.
Going forward into Q4, Large Volumes of Trading Forecasted
Coinbase revealed $183 billion in trading volume for Q3, an 18% drop from last quarter. But Todaro now sees a dramatic turnaround ahead, anticipating that Q4 trading volume will hit $435 billion—a stunning 137% increase in just three months.
This forecasted growth is in keeping with general market trends. In recent weeks, Bitcoin’s share of total cryptocurrency market capitalization dropped from 59% to 51%, pointing to traders diversifying into altcoins.
Todaro points out that the shift is often a sign of increased market exuberance but warns that it could also presage turbulence.
Trading Activity is Boosted by Altcoins and Meme Coins
Although Bitcoin is still Coinbase’s bread and butter, its massive altcoin catalog distinguishes it from the competition. According to Todaro, the platform is successful because it has a wide variety of available assets to list to attract users.
Coinbase recently added meme coins like Gigachad (GIGA), Turbo (TURBO), and Mog Coin (MOG) to their portfolio, highlighting the company’s approach to harnessing market fads.
These listings tend to resonate with retail traders, who are often looking for high-risk, high-reward opportunities. The influx of altcoin activity on the exchange has led Coinbase on track to beat its previous all-time high in trading volume of $462 billion, which was set in May 2021.
Stock Performance is Bullish for Crypto Markets
Coinbase shares hit $334.24 recently, their highest price in three years, on the back of Bitcoin’s rally and a bull market in general. That’s a 60 percent gain from $194 after Donald Trump won the election amid speculation of a more crypto-friendly administration.
Coinbase’s dependence on transaction fees is still a linchpin of its revenue model. In Q3, the firm reaped $572 million from transaction fees and $556 million from subscriptions and services.
The close relationship between trading volume and revenue highlights the degree to which Coinbase’s financial success depends on the volatility in the market.
Political Shifts & Regulatory Clarity March Market Sentiment
Analysts are also feeling good about political and regulatory changes. Oppenheimer analyst Owen Lau raised his price target for shares of Coinbase to $358 earlier this week, pointing to growing trading activity and expected new regulatory clarity under the incoming administration.
Lau costs its trading volume to reach $350 billion in Q4, which is primarily supported by renewed private sector confidence in cryptocurrency coverage.
Risks and Opportunities
This current momentum is a positive sign for Coinbase, but there is slightly more to think about. The waning dominance of bitcoin and the FOMO for altcoins may cause increased volatility in the overall market. Also, the firm’s dependence on transaction-based revenue makes it susceptible to market cycles.
Still, with the growing offering of altcoins on its platform and more favourable market conditions, Coinbase does seem to be in a good position to capture the rising interest in digital assets. If the upward trend in trading volumes continues, the company could really reach the $420 stock price target forecast by analysts.
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