Bitcoin (BTC-USD) has fallen more than 10% since the Securities and Exchange Commission's approval of spot bitcoin ETFs. One company that is exposed to the ups and downs of the cryptocurrency market is Coinbase (CURRENCY).
Owen Lau, CEO of Oppenheimer, joins Yahoo Finance to discuss the state of bitcoin and the impacts it may have on financial institutions, investors, and the cryptocurrency market itself.
When asked about how the price of bitcoin affects Coinbase, Lau states: "I would say this is one of the most important factors for now. The other important factor is that they are going to file a lawsuit with the SEC. So still "There is a regulatory demand." Outstanding. We still don't have clear regulations in the United States at this time, although there is more clarity outside the United States. So I would call the price of bitcoin, the SEC lawsuit and also I think the overall health of the industry. "These are all important factors for Coinbase."
For more expert insights and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's Note: This article was written by nicolas jacobino
Video transcript
[AUDIO LOGO]
JOSH LIPTON: Bitcoin extends its declines and is now trading near $39,000. Optimism about Bitcoin spot ETFs is evaporating. And the declines are also weighing on cryptocurrency-related stocks, including Coinbase. Joining us now is Owen Lowe, CEO and Senior Analyst at Oppenheimer. Owen, it's good to see you. Some of his colleagues, Owen, are making headlines today. They are becoming a bit pessimistic and skeptical on Coinbase. And your concern here, as you look at Bitcoin, you see these Bitcoin spot ETFs, Owen, maybe some sort of news selling event. Do you share that caution here, Owen?
OWEN LAU: First of all, thank you for inviting me. I think in the short term the stock could be volatile because, think about it, if you go back to Coinbase, the stock is up 400% in 2023. And the price of Bitcoin also went up a lot and there was news selling. event that occurs after the timely approval of the Bitcoin ETF. I think in the short term there may be some downward momentum in Bitcoin until the next catalyst. So, I would say that in the short term you will probably see the stock being quite volatile for Coinbase.
JULIE HYMAN: Owen, is the price of Bitcoin the most important factor for Coinbase's stock price?
OWEN LAU: I would say this is one of the most important factors for now. The other important factor is that they are going to file a lawsuit with the SEC, so there is still a regulatory overhang. We still don't have clear regulations in the United States at this time, although there is more clarity outside the United States. So I would draw attention to the price of Bitcoin, the SEC lawsuit, and also, I think, the overall health of the industry, all of which are important factors for Coinbase.
JOSH LIPTON: And Owen, I'm also interested when we talk about Coinbase, the business, and we look at non-commercial revenue, Owen. What percentage of that is now the total? And how do you see that evolution from now on? Because obviously they have put a lot of emphasis and priority on diversifying the business, right?
OWEN LAU: Yes, at the end of the third quarter, I would say about 50%, half of the revenue, came from non-commercial activities. And that income came from interest income and also blockchain income, which is the income that they made from the USDC stablecoin. They have a revenue sharing agreement with Circle.
And then the other smaller revenue items are betting revenue and also custody revenue. So you're right that Coinbase has been making a big effort to diversify away from limiting itself to trading. That's why Bitcoin is important, but it's not... I wouldn't say it's like just one Bitcoin, like just Bitcoin is the predominant factor.
JULIE HYMAN: And then when we look at Bitcoin ETFs as well, right? There was a lot of debate beforehand about whether this will be a blessing, neutral, or even negative for Coinbase. Now that the intro has come and gone, what do you think?
OWEN LAU: So when we look at the fourth quarter trading volume. So when we factor in a lot of the Bitcoin optimism and spot the approval of the Bitcoin ETF, there are two key things that I think not a lot of people are talking about. Number one, the price of Bitcoin went up a lot. And Coinbase's January revenue base is based on the price of Bitcoin.
The second part was about increased trading volume. So what that means is that this Bitcoin ETF can attract new investors, supports higher prices, and also supports higher trading volume. That really benefits Coinbase in the long run. So for me, I think it's a net benefit for Coinbase in the long run because it attracts new investors.
