Coinbase Global, Inc.

(COIN 3.46%)

is currently at the heart of debate among investors in the crypto space. Though exhibiting a 136% surge over the preceding year, a shift in investor outlook has been noticeable with a 28% decline since the turn of the calendar year.

Yet, my stance on Coinbase remains steadfast. Arguments flourish over the potential of new spot Bitcoin
(CRYPTO: BTC)
exchange-traded funds (ETFs) to undermine Coinbase’s stronghold. Despite the trend, I believe the effect may not be as profound as feared. Here is a trifecta of inquiries to ponder before reconsidering your Coinbase investment.

Will Coinbase Compensate for Decreased Bitcoin Trade Volumes?

It’s undeniable that skeptics have a point regarding Coinbase and Bitcoin ETFs: the trading volume for Bitcoin on Coinbase’s primary platform might drop due to these ETFs. This matters, given Bitcoin’s dominance in Coinbase’s trade volumes at nearly one-third. A paradigm shift towards Bitcoin ETFs could see a dip in profitable transaction fees from individual traders.

However, the silver lining lies in the increased exposure to other digital currencies courtesy of the Bitcoin ETF buzz. With Bitcoin making up half the market, Coinbase trades over 150 other cryptocurrencies. The “rising tide lifts all boats” analogy fits well here — an uplift for Bitcoin could translate into heightened trade activities for other cryptocurrencies, potentially enticing more retail investors into the digital asset market.

Is Coinbase Shifting from a Retail to an Institutional Interface?

Contrary to popular views that pigeonhole Coinbase as a retail-centric platform, it has been making strides towards catering more to institutional actors for the past couple of years. Institutional investors with a requisite to directly engage in Bitcoin trading could find a reliable ally in Coinbase.

Take for instance the significant venture established with BlackRock Inc.
(NYSE: BLK)
in August 2022, through which Coinbase aimed to furnish BlackRock’s institutional clientele with a secure crypto trading and management platform.

Following BlackRock’s accomplishment in securing SEC approval for its ETF, Coinbase was handpicked as its custody service provider for digital assets. Notably, Coinbase is marked to be the custodian for eight of the eleven debutant spot Bitcoin ETFs. Under optimistic circumstances, this could help mitigate retail trade volume depreciation with novel fee-generating avenues.

Can Coinbase Persist in Launching Innovative Client Products?

A critical component of Coinbase’s strategic edge lies in its knack for innovation, spearheading novel product offerings to adapt to the evolving crypto landscape. Indeed, some ventures have not panned out as intended, such as the initiative to introduce non-fungible token (NFT) trading, which didn’t strike a chord in the current market.

However, there’s potential on the horizon with the Base blockchain project initiated in August, a first by a publicly traded entity. The buzz surrounding this release points to promising opportunities, particularly in decentralized finance (DeFi) endeavors. Being a Layer 2 blockchain for Ethereum
(CRYPTO: ETH),
Base might become the bedrock for new tokenized financial instruments accessible via Coinbase.

Crypto Democratization: A Boon for Coinbase

Advocating for Coinbase amidst a climate where influential figures like Cathie Wood of Ark Invest pivot towards Bitcoin ETFs could appear daunting, especially after a downgrade from JPMorgan Chase
(NYSE: JPM)
following the ETF launches.

Yet, advancements towards democratizing the crypto sphere through these ETFs ultimately serve to benefit Coinbase. Thus, my long-term outlook on Coinbase remains bullish. Assuming Coinbase perseveres in creating new revenue streams and continues to innovate, my endorsement remains steadfast.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dominic Basulto holds positions in Bitcoin and Ethereum. The Motley Fool endorses and holds positions in Bitcoin, Coinbase Global, Ethereum, and JPMorgan Chase. Refer to The Motley Fool’s disclosure policy.