FinallyCoinbase’s NFT push hit the market this week.
The US cryptocurrency trading giant’s entry into the non-replaceable token market has been a long-standing one and comes at a significant time for the public company. Shares of Coinbase are trading near its lowest level today, ahead of earnings set to land in early May.
Coinbase has proven that it can build a large, profitable business by helping both individuals and institutions buy, sell and wager crypto. But because revenues — and thus net income — fluctuate with the macro health of the crypto market itself, the company has assumed the valuation profile of a bank more than a technology company.
If we observe the company’s fourth quarter net revenue of $2.49 billion, and we compare an annualized version of that number to Coinbase’s current market valuation of $36.3 billion, we can see that the company trades for a turnover multiple of less than 4x.
So Coinbase’s NFT effort is straight forward entry into a market that already has an incumbent – the valuable and popular OpenSea NFT platform – and an opportunity for a new growth vein to tap into. Growth that could help Coinbase move its valuation, and resulting multiples, closer to the reach it enjoyed while private.
Unfortunately, data on the Coinbase NFT push is minimal these days. This isn’t much of a surprise actually, because the former unicorn’s new service is well, new. So let’s ask a few questions instead of trying to parse the initial drops and drops of the third-party analytics services. Today we outline our three biggest headline crackers related to the new Coinbase NFT project.
In basic terms, we want to know how quickly Coinbase’s NFT marketplace can scale in the short term, its potential economic profile and, finally, its long-term growth prospects. We take them in order. Let’s have some fun!
How Fast Can Coinbase Scale NFT Volume?
In the coming weeks, we’ll be curious to see how much volume there is in terms of total trades, as well as the value of those trades powered by Coinbase’s NFT marketplace.
The company has a huge waiting list and just has a huge user base to get to its new product. How well that waiting list converts into active users and then activity is a critical question. And after the waiting list has been sifted, Coinbase’s fraction going into the NFT product will help us determine volume growth at the company for the foreseeable future.
So far, the data is limited and, frankly, incomplete. So we don’t know much today, but the strength of Coinbase’s entry into the NFT game may give us an idea of how quickly volume can scale in the coming quarters, an important period for the company if it wants to recoup some. of the value it has lost in recent months. Of course, however, volume is only one part of the trading income equation. The other is fees.
How Strong Does Coinbase’s NFT Push Economy Look Like?
In the long-term? Good. Short-term? Strange!
Here’s an excerpt from our coverage of Coinbase NFT’s launch from earlier this week:
There are also no transaction fees for NFTs in its marketplace “for a limited time”. Over time, the fee will increase but will be a “low-single digit fee,” Sanchan Saxena, vice president of product at Coinbase, said at the meeting. Users can use a Coinbase wallet or any wallet they own to trade NFTs on the platform.
By not charging any fees to get started, Coinbase is bending over backwards to being incredibly rich and profitable. It can afford to waive fees to boost volume. Once the market reaches a healthy level of supply and demand, it can start generating revenue.