Base Launch and Favorable Macroeconomic Environment Lead To Coinbase Stock Surge

Jimmy Aki
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Major cryptocurrency exchange Coinbase has seen a boost in its bottom line and stock price following the announcement of Base, its native layer-two scaling solution for the Ethereum blockchain.

A Base-Fueled Comeback

The California-based exchange has seen a significant decline in its stock price over the past year as it has served as Wall Street’s poster child for the crypto market downturn. With coin prices slumping and the industry facing one regulatory issue after another, Coinbase stock has continued to plunge over the past months. 

However, investors believe that Coinbase could be in a buy position now that the broader market is poised to make a comeback. And following the unveiling of Base, things appear to be moving in the exchange’s favor financially. Coinbase’s stock surged by almost 10% on Tuesday alone, marking its biggest single-day bump since February 15, when it rose by over 13%. 

All in all, Coinbase’s stock has been up roughly 6% since it announced Base. The network launch must have had a hand in this surge, although it is also worth noting that the major exchange has been seeing some improved fundamentals recently. 

Last week, Coinbase shared its financial results for the fourth quarter of 2022. The results showed that the exchange had beaten revenue expectations for the quarter, even amid a drop in transaction volumes.

Net revenues for Coinbase came in at $605 million, with analysts having expected $589 million for the company in the quarter. The exchange also saw a 34% increase in service and subscription revenues, pointing to a growth in its auxiliary business. Transaction volumes dipped by 12% compared to the previous quarter, but Coinbase believes that a recovering market and the launch of new products should help it to get back on the right track. 

The Market Loves Base

Coinbase launched Base last month, promising that the network would be a layer-two scaling solution that would offer a secure, low-cost, and developer-friendly environment for building decentralized applications (dApps) on Ethereum. Base was designed to serve as a gateway for users into the crypto ecosystem, offering access to other layer-one platforms like Solana and providing interoperability with competing chains. 

Base will also offer access to other Coinbase products and tools, including acquisition resources and fiat onramps. Coinbase has stated that it does not intend to issue a network token for Base and that while the network will initially be centralized, a plan has been put in place to ensure gradual and eventual decentralization.

So far, the launch of Base has received significant support from cryptocurrency experts. Ryan Adams, a popular crypto influencer, explained on social media that Base’s launch appeared to be more of a vote of confidence for Ethereum, which could set a precedent for other financial institutions and developers in the crypto space to use the blockchain as a settlement layer. 

As Adams explained, Coinbase has 110 million verified users. If the exchange can convert 20% of these users to layer-two users in the coming years, there is a potential for the number of crypto-native users to surge significantly. Increased adoption should benefit everyone, from Ethereum to Coinbase’s bottom line.

Of course, it will take some time to see how much impact Base has on the market. However, Coinbase appears to be enjoying a much-needed recovery after its stock price has been doldrums for so long.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.