This Stock Will Benefit from Ethereum ETF Approval This Week – Don’t Miss the Next MicroStrategy
stock Coinbase Global (NASDAQ:COIN) surged more than 8% on Monday and rose again on Tuesday, boosted by potentially big news in the cryptocurrency world.
As of market close Tuesday, Coinbase stock was trading at about $226 per share, up from $208 on Monday morning. Year to date, Coinbase stock is up about 44%.
The catalyst for Coinbase, the largest U.S. cryptocurrency exchange, had to do with the growing sentiment that the Securities and Exchange Commission (SEC) would soon approve a spot Ethereum exchange-traded fund to trade on U.S. markets.
That’s why this is big news for Coinbase.
A spot Ethereum ETF could soon become a reality.
Cryptocurrency stocks, including Coinbase, rose after Bloomberg’s prominent ETF analysts posted to
“Now everyone is panicking because we were hearing talk this afternoon that the SEC may do a 180 on this (increasingly political issue) (just as we all thought it would be rejected),” Bloomberg analyst Eric Balchunas said on Monday. .” he wrote.
Additionally, CoinDesk reported that the SEC has asked exchanges to “rapidly” update their 19b-4 filings, which are forms that record changes to SEC rules.
Additionally, ETF Lab co-founder Nate Geraci posted that a decision on a spot Ethereum ETF could come by this Thursday. He and others have pointed out that a spot Ethereum ETF cannot actually launch until the SEC approves the S-1 registration statement, and there will be no timeline for that.
Still, the odds of an Ethereum spot ETF becoming a reality any time soon are looking better, which has helped crypto industry stocks like Coinbase.
What it means for Coinbase
Coinbase, America’s leading cryptocurrency exchange, is where millions of Americans trade hundreds of cryptocurrency coins and billions of dollars worth of tokens every day.
If a spot Ethereum ETF is approved, it will result in significantly higher trading volume on the Coinbase exchange and higher revenue for the company.
In the first quarter of 2024, Coinbase reported revenue of $1.6 billion, up 72% year-over-year, with a key driver being the launch of 11 spot Bitcoin ETFs in January. These ETFs have already reached $12.5 billion in inflows.
But beyond that, Coinbase saw its custody fee revenue surge 64% to $32 million in the first quarter, largely due to the fact that Coinbase manages eight of the 11 Bitcoin ETFs. Coinbase can expect a similar rise once a spot Ethereum ETF is approved and launched.
Additionally, Coinbase offers ETH staking as a service to its users. This is essentially a way to generate returns of around 2% to 5% on your ETH holdings. The company will receive a portion of this for providing its services, so increasing Ethereum ETF assets is another way to help increase profits.
Coinbase also manages Base, a very popular “Layer 2” block network within the Ethereum ecosystem to improve Ethereum’s scalability and speed. A spot Ethereum ETF will certainly expand this network, which in turn will benefit Coinbase in terms of more traffic and higher profits. And the new Coinbase “smart wallet” makes it easier for Coinbase users to access the Base ecosystem and Ethereum directly.
Therefore, the approval of a spot Ethereum ETF will probably help Coinbase in even more ways than the arrival of a spot Bitcoin ETF since Coinbase has massive Ethereum holdings. And unlike Bitcoin, Ethereum is a productive asset that generates income, allowing Coinbase to profit from its holdings.
What is the next MicroStrategy?
MicroStrategy is one of the hottest stocks on the market this year, up about 150% year-to-date. In January, shortly after the Bitcoin ETF was approved, MicroStrategy was trading at around $450 per share. It’s currently trading for more than $1,700 per share. Although the company’s primary business is providing business intelligence software and services, its growth has come from its massive holdings of Bitcoin, as the company is the largest owner of Bitcoin companies in the country.
As of the end of the first quarter, MicroStrategy held 214,000 Bitcoins worth approximately $13.6 billion. The stock’s sharp rise is almost entirely related to the Bitcoin price surge fueled by the ETF over the same period.
Could Coinbase be the same type of proxy as Ethereum? Should ETFs Lead? Definitely worth a look. However, Coinbase is clearly the largest cryptocurrency exchange in the U.S. and has a broader appeal than its relationship with Ethereum, so it essentially serves as a representative of the cryptocurrency market. However, a surge in the price of Ethereum associated with ETFs would actually help.
As always, these assets are highly volatile so invest with caution. Ideally, it should be a small part of a broadly diversified portfolio.
