The Reasons Why Cathie Wood Says Coinbase Has Massive Opportunities Ahead

Crypto evangelist Cathie Wood, who runs Ark Investment Management, on Friday backed Coinbase Global Inc’s COIN investment in derivatives offerings, NFT platform, and international expansion plans, saying the crypto exchange platform has massive opportunities ahead due to its inherent profitability trait and competitive edge.

What Happened: The popular stock picker has been piling up shares of Coinbase and last week alone scooped up 859,709 shares in the crypto trading platform amid an intensely volatile week that saw the crash in TerraUSD USD/USD.

Coinbase shares traded down 20% on Monday and a further 26% on Wednesday before rising 17% on Friday. The crypto trading exchange, after the bell on Tuesday, reported a $430 million net loss in the first quarter, along with massive declines in active users and announced its decision to increase investment at the expense of short-term earnings.

“Given its inherent profitability, competitive position, and massive opportunities, we believe the company is right to focus on investing in its derivatives offerings, NFT platform, and international expansion,” Wood wrote in a note.

“Importantly, Coinbase had no exposure to Terra or Luna.”

Luna, a cryptocurrency on the Terra Blockchain, went into a free fall last week and its value is now close to zero.

Wood pointed out that Coinbase’s net income margin has fluctuated between 17% and 72% since the beginning of the coronavirus crisis.

See Also: Coinbase Sees Crypto Trading Volume Declines 44% In Q1

The Calm After Crypto Storm?: Coinbase CEO Brian Armstrong said on Wednesday the crypto trading platform has “no risk of bankruptcy” amid a “black swan” event. Armstrong was forced to issue the statement on Twitter after a regulatory filing included a "new risk factor" disclosure.

3/ We believe our Prime and Custody customers have strong legal protections in their terms of service that protects their assets, even in a black swan event like this.

— Brian Armstrong - barmstrong.eth (@brian_armstrong) May 11, 2022

Wood however pointed out more positive traits of the company, whose stock debuted at $429 a share about 13 months ago and closed $67.87 on Friday. 

“In the first quarter, Coinbase increased its verified users by 75% on a year-over-year basis to about 100 million, expanded its share of global spot trading volume from about 11% in 2021 to nearly 14%, and increased the number of monthly transacting users by 51% year-over-year to 9.2 million.”

Coinbase offers the trading of cryptocurrencies such as Bitcoin (CRYPTO:  BTC), Ethereum  ETH/USD and Dogecoin DOGE/USD.  Wood, a Tesla Inc TSLA bull, has said she believes that the bottom for Bitcoin and other digital assets is likely near.

Ark Invest held 7.75 million shares, worth $453.6 million, in Coinbase ahead of Friday’s trade.

Photo: Created with an image from Marco Verch Professional  on Flickr