Coinbase and the Bitcoin ETFs: how strong is the bull case?

Exchange vs custody, what's the best business model

The SEC could approve the launch of a bunch of spot Bitcoin ETFs anytime now. And out of all the applicants, at least nine of them will use Coinbase as the custodian of the coins they hold on behalf of the ETFs.

That's a big opportunity for Coinbase to diversify away from its exchange business and finally become profitable regardless of whether crypto is in a bull market or a bear market.

Or is it? How big is this custodial opportunity really? And what are the chances that the ETFs would provide a real diversification of revenues for Coinbase?

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Coinbase and the Bitcoin ETFs: how big is the bull case?

The takeaway

Coinbase makes most of its revenue from operating a trading platform. By comparison Coinbase Custody is a very small business line.

When Coinbase Custody is used by the some major player in the spot Bitcoin ETFs category they will be able to boost the revenue from those custodial fees.

But realistically this will not change the nature of their business. Not until crypto is an asset class worth tens of trillions of US$.

That doesn't mean COIN is a bad stock. But it does mean that you can't expect miracles from the ETFs alone.

What business model for Coinbase