Coinbase: A Gamble with Pixies and Algorithms

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Right then. Coinbase Global (COIN 2.77%). It’s due to reveal its fourth-quarter earnings on February 12th, 2026 – a date which, if you consult the Lesser Known Calendars of Numerological Significance,1 is considered auspicious for… well, mostly for accountants. The question isn’t if the numbers will appear, but what sort of beasties will be lurking within them. Are we looking at a genuine, sustainable growth, or merely a particularly sparkly illusion?

The whispers on the wind – and, admittedly, the analyst reports – suggest that clearer U.S. crypto regulations, combined with the increasing number of institutions dabbling in digital currencies, might just make this stock a… let’s say, a ‘considered purchase’ before those earnings are revealed. It’s a bit like buying a slightly used dragon – potentially rewarding, but best to check its teeth first.

Improving Financial Conjurations

In the last quarter, Coinbase managed to conjure up $1.9 billion in revenue. Not bad for a company dealing in things that aren’t entirely there. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came to $801 million, and net income a respectable $433 million. The subscription and services segment, the company’s attempt at establishing a regular income stream (rather than relying on the whims of the market), generated $747 million – nearly 40% of the total. This is akin to a wizard finally opening a tea shop – a bit less glamorous than summoning fireballs, but far more reliable.

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Management expects subscription and services revenue to be somewhere between $710 million and $790 million this quarter. This suggests a shift away from relying on the volatile trading of digital tokens and toward… well, toward getting people to pay for things. A novel concept, really. It’s like switching from selling potions that might cure warts to offering a monthly wart-removal service. Predictable income is the cornerstone of any sensible empire, even one built on bits and bytes.

The Shifting Sands of Business

Coinbase Institutional has positioned itself as the primary custodian for most of the U.S. spot Bitcoin and Ethereum exchange-traded funds (ETFs). They’re holding the keys to the digital treasure chests, essentially. They looked after nine out of eleven Bitcoin ETFs and eight out of nine Ethereum ETFs last year. Major players like BlackRock (BLK 0.86%) and Pantera Capital have also moved substantial amounts of cryptocurrency onto the Coinbase Prime platform. This translates into higher custody, settlement, and prime brokerage fees for Coinbase, regardless of whether the price of digital assets is soaring or plummeting. It’s like charging rent on a dungeon – the prisoners may change, but the income remains steady.

And then there’s Base, Coinbase’s Ethereum Layer-2 blockchain network. It’s a sort of digital side street built on top of the main Ethereum highway (Layer-1), designed to move transactions faster and cheaper. As of January 2025, it’s become one of the largest L2 networks, measured by total value locked. This is, in essence, a digital toll booth. Coinbase monetizes it through sequencer fees – charges for processing transactions – and indirectly, as developers and users building applications on Base often rely on Coinbase’s other services. It’s a clever ecosystem, even if the underlying logic feels suspiciously like alchemy.

New Ventures and Potential Pitfalls

Derivatives – those complex financial instruments that even the wizards struggle to understand – represent a significant growth opportunity. They account for 80% of total crypto trading volume, dwarfing spot trading. In August 2025, Coinbase acquired Deribit, one of the world’s largest crypto options platforms. Deribit contributed $52 million to Coinbase’s revenue last quarter. The company aims to integrate spot, futures, and options more closely. It’s like expanding a potion shop to include ingredients for curses and enchantments. More lucrative, certainly, but also potentially more… problematic.

Valuation: A Question of Belief

Coinbase currently trades at nearly 36.1 times forward earnings. That sounds expensive. However, the valuation appears justified, given that revenue isn’t solely reliant on spot trading. The mix is shifting toward more recurring sources, including custody, stablecoins, prime brokerage, subscriptions, and derivatives. It’s like a kingdom diversifying its economy beyond sheep farming. Still vulnerable to external shocks, of course – a sudden dragon attack, for example – but more resilient overall.

Yet, the stock remains sensitive to cryptocurrency prices, trading volumes, and regulatory changes. A harsh word from a government official, a sudden market crash, or a rogue AI could all send the price tumbling. It’s a volatile world, and digital assets are particularly susceptible to its whims.

Considering all these factors, long-term investors who are confident about continued cryptocurrency adoption – and who possess a high tolerance for share price volatility – might consider taking a small stake in this stock before mid-February. Just remember: investing in digital assets is a bit like riding a griffin – exhilarating, potentially rewarding, but with a distinct possibility of being dropped from a great height.

1 The Lesser Known Calendars of Numerological Significance are, naturally, a closely guarded secret. Rumor has it they were compiled by a council of eccentric astrologers and disgruntled accountants, and that they predict everything from the price of turnips to the likelihood of goblin uprisings.

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2026-01-25 04:32