Title: “Which Stock is the Superior Choice: Coinbase or Robinhood?”
Author: Jack Inabinet, Bankless
Translated by: Luccy, BlockBeats
Editor’s Note: This article delves into two influential companies in the cryptocurrency field – Coinbase and Robinhood. Coinbase, with its crypto-native background and strong industry roots over the years, has garnered significant favor among American retail and institutional investors.
On the other hand, while Robinhood may not match Coinbase in terms of cryptocurrency trading volume, it still holds high popularity among American retail traders and possesses strong regulatory capabilities. Robinhood is actively entering the crypto market, developing non-custodial wallets, and planning to acquire the established European crypto exchange Bitstamp, further expanding its influence in the crypto space.
This article provides an in-depth analysis of the unique advantages and potential risks of both companies in the cryptocurrency market, offering valuable insights for investors. The translation of the original text by BlockBeats is as follows:
For a long time, Coinbase stock has been the obvious choice for investors to access cryptocurrency through a publicly traded company, but now another company is 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, a title that has allowed it to establish strong connections among American retail and institutional cryptocurrency enthusiasts over its 12-year existence.
Centralized cryptocurrency exchanges usually offer limited insights into their financial condition. However, as a publicly listed company on the US stock market, Coinbase undergoes strict audits and reports to the SEC, reducing the possibility of customer funds being misappropriated.
While most exchanges primarily focus on trading, Coinbase is not just a simple market; it is one of the earliest companies in the CEX space to build on-chain operations and play a crucial role in infrastructure development, launching its own wallet and Ethereum L2 Base!
With Ethereum implementing EIP-4844 in the March Dencun upgrade, the cost of L2 deployment data has decreased by several orders of magnitude, and Base’s on-chain operating profit margin has almost reached 100%, meaning that almost all transaction fees paid on Base go directly into Coinbase’s revenue.
Despite a significant decline in Base’s revenue since the peak at the end of March, according to data from L2 BEAT, the network still ranks as the second-largest L2 in terms of TVL and generates more profits than any other major L2, often netting over $100,000 per day.
Source: Dune
In addition to its on-chain infrastructure, Coinbase also provides its users with a complete set of custody tools, offering advanced staking services and an ETH liquidity staking token, along with an institutional-grade custody solution.
Coinbase Custody is widely regarded as a leading digital asset custody provider and serves eight of the 11 spot BTC ETFs in the US, including Grayscale’s GBTC and BlackRock’s IBIT (the two largest products by assets under management). This arrangement allows Coinbase to earn custody fees from the assets they manage, in addition to earning revenue through creating and redeeming transactions. If spot cryptocurrency ETFs continue to gain traction among traditional market participants, this will provide a strong revenue driver for the company.
Cryptocurrency payments have yet to achieve mainstream adoption, but 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 the public’s willingness to hold 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 the needs of international users who are not subject to US financial regulations, enabling them to trade various cryptocurrency futures on the exchange; if the crypto industry gains positive regulatory clarity, these services can easily expand to the US platform – which currently only offers BTC and ETH futures.
Furthermore, holders of COIN stock can benefit from the success of Coinbase Ventures’ investment portfolio, which includes many profitable private market opportunities inaccessible to retail and external investors.
Reasons to Support HOOD:
While Coinbase holds an advantage in cryptocurrency trading volume, Robinhood remains the undisputed champion among American retail traders.
Although the total assets under custody on the Robinhood platform are less than Coinbase, when combining stocks, options, cash, and cryptocurrency balances, in the first quarter of 2024, Robinhood had 70% more monthly active users than Coinbase, highlighting the exchange’s popularity among retail traders.
Undoubtedly, Robinhood’s biggest strength lies in its compliance; as a brokerage, Robinhood is regulated by the SEC. If the SEC creates new classifications for digital asset securities and trading is restricted to registered brokerages only, Robinhood could become a dominant cryptocurrency exchange.
While Coinbase is evidently a more crypto-native company and has attracted a significant talent pool closely connected to the industry, aside from regulatory uncertainties, nothing is 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 (although it may still be rejected by regulatory authorities), Robinhood acknowledges the growth potential of its crypto business. Despite ongoing legal battles with the SEC, the company confirms its commitment to engaging in blockchain technology to the best of its ability.
Bitstamp’s 4 million active users are primarily from Europe, which is very attractive to a US-centric buyer like Robinhood, and the acquisition also includes Bitstamp’s core staking and lending products, enabling Robinhood to better compete with crypto CEX services and demonstrate its ability to catch up with crypto-native competitors by acquiring crypto technology developed by other companies.
Key Points:
For cryptocurrency investors 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 the industry hype returns, these investors are likely to enter the cryptocurrency space due to Robinhood’s convenient purchasing and custody solutions.
On the other hand, Coinbase has a verified track record in crypto business performance 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 listed exchanges have their unique strengths and weaknesses, and while Robinhood is currently at a disadvantage in this competition, Coinbase’s dominant position is not unassailable, especially in a future with stricter crypto financial regulations.
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