US stocks: Analysts believe that Coinbase stock has outperformed the S&P 500 index five times, and the market is optimistic

The Motly Fool analysts say that Coinbase (Nasdaq: COIN), the largest cryptocurrency exchange in the US, has been strong since its market debut this year, with its stock returning five times the S&P 500 index over the past year. The outlook is positive, and it could bring satisfactory returns in 2025 and the future. Here are the key points of the analysis.

The Trump administration adopts a loose policy on cryptocurrencies

The Trump administration strongly supports cryptocurrencies. On January 23, President Trump signed a new executive order to vigorously promote the development of cryptocurrencies and prepare to hold cryptocurrency assets in reserve. Trump has promised to stop taking aggressive enforcement and oversight measures against the cryptocurrency industry.

Scott Bessent, the Treasury Secretary nominated by President Trump, also tends to support cryptocurrencies. Last summer, Bessent told Fox News that he was excited for Trump to accept cryptocurrencies. In addition, Paul Atkins, the SEC chairman selected by Trump, is more friendly to cryptocurrencies than the previous chairman Gary Gensler, who advocated for stronger regulation of cryptocurrencies. This is good news for Coinbase, which has been in court with the SEC since 2023 for being accused of operating an unregistered securities exchange. Now that Trump's people are in power, Coinbase can breathe a sigh of relief and flex its muscles. Trump's loose policy on cryptocurrencies will be more favorable for Coinbase's products and blockchain development, at least without facing the endless regulatory challenges of the past.

Coinbase's monthly trading users grew 16%, and trading volume increased 143% year-over-year

Coinbase exchange can trade over 240 digital assets, including Bitcoin, Solana, Dogecoin, and hundreds of smaller Altcoins. Its core business is the trading service, with a minimum transaction fee of $0.99 per trade, which is the main source of revenue for Coinbase from retail investors.

In the third quarter of 2024, Coinbase had 7.8 million Monthly Transacting Users (MTU), up 16% year-over-year; the trading volume reached $185 billion, up 143% year-over-year.

Coinbase sells diversified financial products, and its financial report shows steady growth

Coinbase is not only a cryptocurrency trading exchange, but also provides staking and lending financial products, where users can earn rewards by staking their cryptocurrencies, and Coinbase charges fees to generate profits.

Coinbase recently launched a Bitcoin-backed USD Coin lending program through Morpho, an open-source lending protocol that charges a floating interest rate. Coinbase's staking programs and lending can generate more revenue for the exchange.

Coinbase also provides ETF custody services and is now the preferred custodian service provider. The recent financial report shows that revenue is growing continuously. In the third quarter of 2024, Coinbase's Premium user subscription fees generated $556 million in revenue, up 66% year-over-year. Cryptocurrency trading fees generated $572 million in revenue, up 98% year-over-year.

Analysts also warn that Coinbase's stock is highly volatile. After its IPO in 2021, it plummeted nearly 90% by the end of 2022, and then grew more than 600% over the next two years. Investing in Coinbase stock is almost as risky as investing in cryptocurrencies. The above is for research reference only and does not constitute any investment advice.