Insider Monkey Favors Coinbase’s Fee Business Over Strategy’s Bitcoin Bet

Insider Monkey’s comparison favors Coinbase over Strategy, arguing that the exchange’s operating business is a stronger proposition than Strategy’s bitcoin-backed model. Both stocks have fallen sharply over the past year, the article says: Coinbase by well over a third and Strategy by close to half.

The difference, according to the analysis, is what investors own. Coinbase generated about $6 billion in revenue over the past year through trading fees and other services. Strategy brought in under $500 million, while its roughly $66 billion market value reflects its bitcoin holdings; Coinbase’s market value was about $52 billion.

Strategy’s approach relies on issuing shares to buy more bitcoin when its stock trades above the value of the bitcoin behind each share. The article says that mechanism only works under that condition, which has not held for much of this year.

Coinbase, meanwhile, reported a net loss over the past year. The analysis says the loss came largely from marking down crypto holdings, while the fee business generated operating profit. It also warns that trading volumes can fall when crypto activity slows.

Strategy recorded a loss of more than $31 billion over the same period and carried close to $7 billion in debt, according to the article. Insider Monkey’s view is that Coinbase’s licenses and revenue from subscriptions and services offer a better business foundation, while Strategy’s borrowing amplifies bitcoin’s downside as well as its gains.