Coinbase is being repriced by a quiet institutional wave

The shift the market is not watching

While many focus on headlines about regulation, a different story is building in the background. Big banks are moving. In July, PNC partnered with Coinbase to bring crypto trading and custody to clients. Soon after, JPMorgan moved to connect banking services with Coinbase to meet client demand. Surveys show 86% of large investors already have exposure or plan to add. This is not retail chatter. It is infrastructure getting built for scale.

Two forces sit at the centre. Stablecoin clarity after the GENIUS Act in July 2025 and the rise of regulated crypto derivatives. Stablecoins now have legal guardrails. USDC adoption is lifting, with stablecoin market cap up an estimated 17% since the Act passed. At the same time, derivatives already account for roughly 75% of global crypto volume. Coinbase is positioned to plug into both flows with regulated rails and custody.

Our call on Coinbase today

We initiate at Hold with a 12 month price target of $367. Our PT implies 3.6% upside from $354. We base the PT on a forward P S of 10.3x applied to FY26E revenue of $9.14bn. We choose P S because revenue scales before margins in this phase of adoption and because mix will keep moving from volatile trading to higher quality subscription and custody. Earnings power will follow the mix. P S captures the top line optionality better in this stage.

We are constructive on the long term. We stay disciplined on the next 12 months. The setup has real upside if the new rails deliver, but the stock already carries a theme premium. We want proof that the non linear drivers are durable before we move up the rating.

What most investors are missing about Coinbase

Consensus still models Coinbase as a spot trading story with little credit for two engines that are now switching on. First, stablecoin economics. The GENIUS Act gives US institutions the clarity to hold and use USDC at scale. We model USDC balances at $425bn and a return to pre Act growth near 78% y y. That adds roughly $300mn to FY25E revenue versus street and about $550mn in FY26E. The reason is simple. More balances and more velocity put more dollars on the reserve base and more activity through payments and settlement.

Second, derivatives. Coinbase International Exchange is scaling and Coinbase has optionality to add more exposure through a Deribit close or faster organic rollout. We model incremental derivatives revenue of about $230mn in FY25E and about $500mn in FY26E versus street. The why is market structure. Derivatives are the dominant venue for volume. They create deep liquidity, drive repeat use and expand the institutional funnel for Prime and custody.

Our FY25E revenue is $7.62bn and our FY26E revenue is $9.14bn. That sits about $302mn above street in FY25E and about $790mn above in FY26E.

How we see the next 6 quarters

H1 2025 revenue of $3.38bn gives a firm base. We expect H2 to accelerate as USDC adoption moves from policy to practice and as derivatives incentives roll off while volumes hold. We also bake in a small 3% blended fee compression in FY25E and still add about $140mn versus street by modelling liquidity incentives more precisely. We assume listings revenue of about $80mn in FY25E and about $300mn in FY26E as policy clarity improves listings cadence.

By stream, we model stablecoin revenue of $1.10bn in FY25E and $1.35bn in FY26E as on platform USDC balances rise and Circle economics deepen. We model consumer transaction revenue at $4.275bn in FY25E and $4.875bn in FY26E, helped by Coinbase One and better onboarding with Smart Wallet. Institutional transaction revenue steps up to $615mn in FY25E and $790mn in FY26E as derivatives and Prime cross sell scale. Blockchain rewards rise to $815mn in FY25E and $935mn in FY26E on stronger staking adoption. Interest and finance fees soften to $245mn in FY25E and $225mn in FY26E given rate normalisation, partly offset by growth in Prime Financing.

We forecast total trading volume at $1,550bn in FY25E and $2,000bn in FY26E. This build leans on derivatives as the main engine for throughput and on steady share gains in retail advanced and institutional flows.

Why derivatives matter for the equity story

Derivatives are high throughput and lower fee per unit, but they bring scale, liquidity and engagement. They also make Prime more strategic because unified margin and capital efficiency let clients turn custody into active flow. We assume incentive programmes suppress take rates for a few quarters. That is a rational trade to seed depth. As incentives fade, the base volume remains. This is why we model revenue rising even with mild fee compression.

If Coinbase closes Deribit in mid 2025, options penetration expands the addressable flow beyond perpetual futures. If the deal slips, the International Exchange can still fill part of the gap through listed perps, global access and better market quality. Either way, derivatives should be a growing share of company volume because derivatives are already three quarters of global crypto activity.

Users and balances are improving in quality

We do not chase vanity metrics. We focus on activity that converts to revenue. Monthly transacting users are now re accelerating as product friction falls. Smart Wallet cut time to first transaction from 2.5 hours to 8 minutes. Biometric recovery reduces drop off. Coinbase One has more than 0.6mn paid members and these users trade more and use more services. We model MTUs at 10.5mn in FY25E and 12.0mn in FY26E.

Assets on Platform were $404bn at FY24. We model a move to $515bn in FY25 and $670bn in FY26. USDC balances on platform rose 49% q q in Q1 2025 and that supports stickier balances. Custody demand from institutions is rising as regulated players consolidate with trusted rails. Larger balances support higher quality revenue from custody, staking, Prime Financing and developer services. This mix improves margin convertibility into FCF over time.

How we value Coinbase

We apply a forward P S of 10.3x to FY26E revenue of $9.14bn for a PT of $367. We benchmark against theme leaders that convert transaction rails into recurring services. Names like CME and Cboe for derivatives access, Galaxy for institutional services, and Robinhood and Block for retail distribution. Coinbase deserves a premium to pure transactional peers because it has regulatory approvals, a custody moat and net cash that improve scaling efficiency and contract visibility. We still use a disciplined multiple because fees compress and volumes are episodic.

Sensitivity sits with mix. Faster adoption of subscription and custody can lift both the base and the multiple. A return to trading led growth with lower fee per trade can cap the multiple. We will watch subscription run rate, custody AUM, derivatives throughput and fee per trade as the main signposts.

What must go right for our upside case

GENIUS Act implementation needs to translate into real USDC balances across banks, brokers and treasurers. Coinbase International Exchange must keep taking share as perpetuals scale and as liquidity programmes taper without losing depth. A Deribit close would accelerate options, but an organised organic path can still deliver the step up. Circle terms need to hold or improve. European approvals under MiCA and MiFID should open more regulated demand. Spot ETF custody and settlement will add to inflows if pipelines convert. The rate path should not collapse too fast, otherwise stablecoin yields fall more than we model.

Where we could be wrong

Regulatory and legal risk is not done. Active SEC litigation, state staking actions and an interlocutory appeal process raise the chance of product pauses or higher costs. New tax and reporting rules have staged compliance dates in 2025 and 2027. That can add OPEX and slow onboarding. If rates fall faster than our curve, stablecoin yield income will drop and reduce our USDC uplift. If Circle renegotiates distribution terms, which we assign a 15% chance, revenue could shift down. If a Deribit deal slips or breaks, we would move part of our derivatives build to later periods. Each of these could swing $150mn to $200mn across years. Execution on liquidity incentives is also key. If incentives end before network depth is sticky, volumes can fade.

What to track right now

Watch USDC outstanding and on platform balances each quarter. Watch derivatives share of company volume and market share on the International Exchange. Watch fee per trade trends as incentives roll down. Watch subscription and services run rate, especially custody and Coinbase One. Watch custody AUM tied to spot ETFs and Prime Financing balances. These datapoints will tell you if the flywheel is working.

Bottom line

Coinbase is tied to a structural move as digital assets institutionalise under clearer rules. Stablecoin regulation and derivatives scale are the twin engines that can push revenue above consensus and improve mix. Our model calls for $7.62bn in FY25E and $9.14bn in FY26E, with the bulk of the upside versus street from USDC economics and derivatives. Our PT is $367 on 10.3x forward P S. We stay at Hold because the stock already embeds a theme premium and we want the next proof points on USDC adoption, derivatives market share and subscription mix. If these arrive on time, both the base and the multiple can move. If they slip, the stock can de rate. For now, we watch the signposts and stay disciplined.