The Motley Fool

Should I buy Coinbase shares at the current price?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

New virtual money concept, Gold Bitcoins
Image source: Getty Images

Since its IPO just over two months ago, the Coinbase (NASDAQ: COIN) share price has fallen 30%. It is no secret that the crypto market has taken off since the turn of 2021, and this is reinforced by Bitcoin’s April all-time high of $63,000. Although volatile, the crypto market has boomed the past six months. So why are Coinbase shares continuing to fall? Let’s take a closer look.

Bull case

First, let’s look at the positives. Clearly, the crypto market has gained popularity with some investors. In fact, 14% of all US adults own crypto in some form. With total users currently at 56m, the potential market for Coinbase to expand and grow into is evident.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

To add to this, Coinbase’s latest first quarter results provide positive signs. Revenues were £1.8bn, up from $585 in the previous quarter. Trading volume was also up, at $335bn, having sat at $89bn in Q4 of 2020. This is especially relevant for Coinbase, as roughly 90% of its revenues come from transaction fees. This means that the large amounts of volatility the crypto market can produce may not necessarily impact Coinbase negatively, as it makes money from people both buying and selling, via fees. This is a real boost for Coinbase shares.

Although many people continue to disregard the crypto market, many also seem to be endorsing it. Back in May, I looked at how the Scottish Mortgage Investment Trust diversified into the world of crypto with a £72m investment. Confidence from large operations such as SMT could have a real effect on investor confidence, positively impacting Coinbase shares.

Bear case

With this said, I do have my concerns. All the above is dependent on the fact the cryptocurrency market is here to stay. With BTC currently trading at $39,000, 38% lower than its April high, the signs do not look encouraging. The volatility the market has continued to produce makes investors wary to make the leap and invest, which does not bode well for the future Coinbase share price. This was most noticeably seen with Elon Musk and his tweet regarding Tesla halting BTC as payment for its vehicles, which saw a more than 10% fall in the BTC price.

Another issue is the stock’s valuation. With a market capitalisation of $59bn and a rather high valuation, are Coinbase shares overpriced and destined to continue to fall?

My verdict on Coinbase shares

Provided the crypto market is here to stay, Coinbase offers huge opportunities, in my opinion. I would have expected the positive Q1 results to have boosted the share price, but the bearish outlook on the crypto market seems to have outweighed them.

I see the volatile market as a real stumbling block for me taking the leap and investing in Coinbase shares, and I can see the share price falling even further. Ultimately, I am going to keep Coinbase on my watchlist until the crypto market can prove it is more stable.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Charlie Keough owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK owns shares of and has recommended Bitcoin and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.