Coinbase is the 'Amazon of crypto': Expert

Bitcoin (BTC-USD) has been on a tear since the approval of the spot bitcoin ETF. Within the past month, inflows for financial firms offering the ETFs have been in the billions. Popular crypto exchange Coinbase (COIN) has been at the center of crypto trading, with shares of the company up 50% since the start of the year.

Citizens JMP Director of Financial Technology Research Devin Ryan joins Yahoo Finance to discuss the compelling upside case to the crypto exchange.

Ryan highlights the opportunity present in Coinbase, calling it an "on-ramp" into the asset class: "We've been framing Coinbase as, a little bit cliche, but as the Amazon (AMZN) of crypto. And what I mean by that is they got into buying and selling as an exchange; really, that was the first foray into crypto. That's becoming increasingly commoditized. There's still going to be huge growth in the exchange platform, but Coinbase is really the primary on-ramps into the asset class, so if folks want to get involved in payments or remittance or, in our opinion, tokenization of real-world assets, web three, they have their own blockchain called base, they're going to be involved in virtually every aspect of how this industry grows, and then there is going to be parts of this industry, in our opinion, that are idiosyncratic to crypto."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

MICHAEL SAYLOR: Bitcoin is the highest form of properties, the apex property in the world, and it's the best investment asset. So the end game is to acquire more Bitcoin. Whoever gets the most Bitcoin wins.

- Whoever gets the most Bitcoin wins. MicroStrategy Chairman Michael Saylor, a longtime Bitcoin bull, raving about Bitcoin as an investment. The digital asset reaching new highs this week. Coming off the launch of Spot Bitcoin ETFs. Crypto related stocks, such as Coinbase, also doing very, very well, up roughly 50% since the start of the year. Next guest saying that there's still a compelling upside case to the crypto exchange. We want to bring in Devin Ryan, Citizens at JMP, director of Financial technology research joining us now.

Devin, it's great to have you here at the desk with us. So just first, your reaction that we've seen to the massive increase in the price of Bitcoin and obviously Coinbase a big beneficiary of that.

DEVIN RYAN: Yeah, absolutely. First off, great to be here. What we talked about, we actually put a report out last night. There's been $10 billion of net inflows into these ETFs over the last two months. We are saying that we think there will be $220 billion of additional net inflows into these ETFs over the next three years. So the comment is that the ETFs are truly transformational for this space. What we're talking about with the ETFs is there's $25 trillion of financial advisor driven money that really hasn't even been allocated yet, and the ETFs opened the door to that part of the market.

And so, of course, yes, when there's big demand, the $10 billion is driving prices higher, and then, ultimately, that's really good for companies like Coinbase because they're benefiting both from the ETFs directly in trading those, but there's is a lot of interest in crypto more broadly, so they're trading, volumes are up over 100% in the first quarter over the fourth quarter. And then bigger picture Coinbase to us is really a play on, just the evolution of the asset class.

And so that's really I think what people miss so far in the stock, and that's why we think there's still quite a bit of upside. So they're going to evolve their business model with the evolution of the asset class.

- In terms of flows, when we look at Grayscale's Bitcoin ETF, definitely struggling a little bit. I see the smile there. Over 7 and 1/2 billion of Exodus there in the first 30 trading days, is that an idiosyncratic issue for them, or is that indicative of maybe some outflows to come for other names?

DEVIN RYAN: Yeah. I think they're really specific. So there's at least a couple billion dollars of that you just cited that's related to just some of these bankruptcy estate sellings, and I think that's already generally played out. And then there's also some selling from people that initially got in to grayscale because they were just playing the trade around, the premium that the GBTC was trading to Bitcoin several years ago, and then, ultimately, even more recently, the discount, and I think there was some traders in that.

And so some of those folks have exited, and then you're seeing a little bit of rotation to where some people have been selling that ETF and going to some of the lower fee ETFs. So they actually just announced yesterday another ETF structure. So I think they're going to be back in the game, potentially, bringing in inflows. But, yeah, I think of that as really idiosyncratic, and then the net flow story is really we're focused on, which is $10 million over 2 months.

- You mentioned the fact that you see Coinbase's business evolving, the platform evolving as the industry does. How so, and what does Coinbase need to do in order to maintain that edge?

DEVIN RYAN: Yeah. I mean, I think that's really the key story. We've been framing Coinbase, it's a little bit cliche, but the Amazon of crypto. And what I mean by that is they got into buying and selling as an exchange, really that was the first foray into crypto. That's becoming increasingly commoditized. Now, there's still going to be huge growth in the exchange platform, but Coinbase is really the primary on ramp, or one of the primary on ramps into the asset class.

So if folks want to get involved in payments, or remittance, or, in our opinion, tokenization of real world assets, Web3. They have their own blockchain called Base. They're going to be involved in virtually every aspect of how this industry grows. And then there's going to be parts of this industry, in our opinion, that are really idiosyncratic to crypto. So, you know, staking as an example, and they'll probably be other innovations. So Coinbase is going to be involved in all of that as they already are.

Their subscription and service revenues were essentially 0 in 2020, now they're 1 and 1/2 billion dollars. I think those are going to grow a lot faster than even the exchange part of the model. So that's really simplistically, the story. And I think what a lot of people will miss that it's all about trading, and the Bitcoin ETF, and less about these other areas, and those other areas are really what's going to be what drives a revenue growth over the next decade.

- Certainly. We're taking a look at Coinbase up another 5% today. Devin Ryan, always great to have you. Thanks so much for hoping on with us.

DEVIN RYAN: Thanks so much for having me.