Title: “Which Stock is a Better Investment: Coinbase or Robinhood?”
Author: Jack Inabinet, Bankless
Translated by: Luccy, BlockBeats
Editor’s Note: This article delves into two influential companies in the cryptocurrency space – Coinbase and Robinhood. Coinbase, with its crypto-native background and established reputation in the industry over the years, has garnered favor from a large number of American retail and institutional investors.
On the other hand, while Robinhood may not match Coinbase in cryptocurrency trading volume, it still remains highly popular among American retail traders and possesses strong compliance capabilities. Robinhood is actively expanding into the crypto market, developing non-custodial wallets, and planning to acquire the well-established European cryptocurrency exchange Bitstamp to further enhance its influence in the crypto space.
This article provides an in-depth analysis of the unique strengths and potential risks of both companies in the cryptocurrency market, offering valuable insights for investors. The translation by BlockBeats is as follows:
Coinbase stock has long been the obvious choice for investors looking to access the world of cryptocurrencies through a publicly traded company, but now there is another company challenging that position.
Last Thursday, Robinhood announced a $200 million acquisition of Bitstamp, the oldest operating cryptocurrency exchange that holds valid licenses to operate in over 50 countries.
So, should you hold COIN stock or HOOD stock?
Today, we will explore the differences between Coinbase and Robinhood to understand why investors have confidence in both of these stocks.
Reasons to support COIN:
Coinbase is often considered the most reputable cryptocurrency exchange, which has allowed it to establish deep connections within the American retail and institutional crypto community over its 12-year history.
Centralized cryptocurrency exchanges typically provide limited insights into their financial condition; however, as a publicly traded company on the US stock market, Coinbase is required to undergo strict audits and submit reports to the SEC, reducing the likelihood of customer funds being misappropriated.
While most exchanges primarily focus on trading, Coinbase is more than just a market; it is one of the earliest companies in the CEX space to build on-chain operations and has played a crucial role in infrastructure development, launching its own wallet and Ethereum L2 Base!
With the cost of publishing data on L2 significantly reduced after the EIP-4844 upgrade in March, Base’s on-chain operating profit margin has almost reached 100%, meaning that almost all transaction fees paid on Base go directly to Coinbase’s revenue.
Despite a significant drop in revenue since the peak in late March, according to L2 BEAT data, the network is still the second-largest L2 by TVL and generates more profit than any other major L2, often earning over $100,000 in net profit per day.
In addition to its on-chain infrastructure, Coinbase also offers its users a full suite of custody tools, providing advanced staking services and an ETH liquid staking token, as well as institutional-grade custody solutions.
Coinbase Custody is widely regarded as a leading digital asset custody provider and serves 8 out of 11 spot BTC ETFs in the US, including Grayscale’s GBTC and BlackRock’s IBIT (the two largest products by AUM). This arrangement allows Coinbase to earn custody fees from the assets they manage and also profit from creating and redeeming fees, providing a strong revenue driver if spot cryptocurrency ETFs continue to gain traction among traditional market participants.
While mainstream adoption of crypto payments has yet to be realized, the Coinbase team has developed the necessary infrastructure through its Commerce platform, enabling merchants to accept hundreds of crypto assets as payment for goods and services directly into their self-custody crypto wallets.
If public interest in holding crypto assets strengthens and they recognize the benefits of self-custody technology, this will help Coinbase generate more revenue through the platform.
Coinbase also caters to international users who are not subject to US financial regulations and can trade various crypto asset futures through the exchange; if the crypto industry gains positive regulatory clarity, these services could easily expand to US platforms – currently the platform only offers BTC and ETH futures.
Furthermore, holders of COIN stock can benefit from the success of Coinbase Ventures’ portfolio, which includes many lucrative private market opportunities that retail and external investors cannot access.
Reasons to support HOOD:
While Coinbase has the advantage in cryptocurrency trading volume, Robinhood remains the undisputed champion among American retail traders.
Despite having less total assets under custody on the Robinhood platform compared to Coinbase, when adding up stocks, options, cash, and cryptocurrency balances, in the first quarter of 2024, Robinhood had 70% more monthly active users than Coinbase, highlighting its popularity among retail traders.
Undoubtedly, Robinhood’s biggest strength lies in its compliance; as a brokerage firm regulated by the SEC, if the SEC creates new classifications for digital asset securities and trading is restricted to registered brokers, Robinhood could become a leading cryptocurrency exchange.
Although Coinbase is evidently a more crypto-native company and has attracted a significant amount of talent closely connected to the industry, apart from regulatory uncertainties, there is nothing stopping Robinhood from creating its own crypto applications.
Robinhood has developed its proprietary non-custodial wallet solution and recently launched a feature that allows users to buy cryptocurrencies directly on the Uniswap mobile app using funds from their Robinhood Connect account.
Through its proposed acquisition of Bitstamp (though it may still be rejected by regulatory bodies), Robinhood acknowledges the growth potential of its crypto business. Despite the ongoing legal battles with the SEC, it confirms its commitment to actively engage with blockchain technology.
Bitstamp’s 4 million active users are primarily from Europe, making it an attractive population for its US-centric buyers, and the acquisition also includes Bitstamp’s core staking and lending products, allowing Robinhood to better compete with services offered by crypto CEXs and demonstrate its ability to catch up with native crypto competitors by acquiring crypto technology developed by other companies.
Key Points:
For crypto investors who are already bullish on COIN, it is not difficult to also be bullish on HOOD, considering the company’s apparent active entry into the crypto market and its popularity among American retail investors. If there is another industry boom, these investors are likely to enter the cryptocurrency space due to the convenient purchasing and custody solutions provided by Robinhood.
On the other hand, Coinbase has a proven track record in the crypto business and has been adopted by a large number of institutions, which is reflected in the preference of spot crypto ETF issuers for its services.
Both of these public exchanges have their unique strengths and weaknesses, and while Robinhood currently lags behind in this competition, Coinbase’s dominance is not unassailable, especially in a future stricter crypto financial regulatory environment.
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