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Despite Going Through a Bearish Phase, Coinbase Stock is Deemed Undervalued

Market perception and Coinbase’s strategic shift

Amid a 16% decline in its share price over the past five days, Coinbase is seen by analysts as a significant venture-style investment opportunity, not fully appreciated by traditional market players.

Key takeaways:

  • Coinbase shares have fallen significantly, but underlying value from its Base network could suggest it's undervalued.
  • Base's revenue from sequencer fees alone projects to $360 million annually, not fully accounted for by the market.

Over the last week, Coinbase shares have experienced a sharp 16% drop, currently trading at $218.08, reflecting broader market uncertainties. 

Yet, crypto analyst Will Clemente on the recent Unchained Crypto podcast argued that the market is missing a critical aspect of Coinbase’s value. Clemente stated: 

“The street isn’t really pricing in the crypto native revenue that I think a lot of the crypto natives understand. I think Coinbase is the biggest kind of venture-style bet in public markets since maybe Tesla about five years ago.”

He further highlighted that traditional investment perspectives might not fully appreciate the strategic developments at Coinbase, particularly its transformation towards becoming a 'crypto super app' through initiatives like its Ethereum layer-2 network, Base.

Insights into Base’s financial impact on Coinbase

Base, the Ethereum layer-2 solution developed by Coinbase, has shown significant operational success, with a total value locked (TVL) of $5.35 billion and processing 30.81 transactions per second. More notably, Clemente emphasized Base's financial contributions: 

“Over the last 30 days, Base has done $30 million of top-line revenue for Coinbase just based on the sequencer fees, which annualizes out to like $360 million a year.”

This substantial revenue generation, according to Clemente, is largely overlooked by the broader investment community. He criticized the lack of recognition for Base's potential: 

"The street doesn’t even know what Base is, and they’re definitely not extrapolating out the potential of a ton of activity taking place there and the sequencer fees that Coinbase may benefit from that."

As geopolitical tensions add to market pressures, the insights from industry experts like Clemente and movements by significant investors such as Cathie Wood’s ARK Invest — which sold 3,689 COIN shares recently — add layers to the narrative around Coinbase’s current valuation and future prospects.