Coinbase exchange could earn $1.2B next year from higher Interest Rates, according to JPMorgan note

Coinbase exchange could earn $1.2B next year from higher Interest Rates, according to JPMorgan note

 

Cryptocurrency Exchange Coinbase Global (COIN) might be able to generate USD 1.2 billion of additional interest income-driven revenue in 2023 given the rapid rise in short-term interest rates, Ken Worthington, JPMorgan analyst told clients in a note earlier this week.

 

Coinbase exchange joint venture with USDC issuer Circle could alone contribute about USD 700 million of incremental revenue, according to JPMorgan estimates. The two crypto companies formed a partnership in 2018 called the CENTRE Consortium, which included a revenue share on interest income from USDC reserves.

 

Also Read: Crypto Exchange Coinbase Enlists Broadridge Financial To Improve Liquidity

 

Additional ways Coinbase exchange could earn interest income are from customer fiat and its corporate cash balance, JPMorgan further noted, adding up to a potential total of USD 1.2 billion in added revenue next year.

 

 

The global investment bank further said that a key risk for Coinbase exchange realizing its interest income is the possibility of a reduced holding of USDC and fiat currency with the cryptocurrency exchange.

 

“We see the potential for institutional clients to hold less USDC given the opportunity cost of holding quasi-cash that doesn’t offer a return. We also see retail holding less of its fiat at Coinbase global since it doesn’t get a return. As such, we see the potential for USDC balances and fiat balances to decline for Coinbase global,” JPMorgan wrote.

 

Also Read: Is Coinbase Exchange Doing Right By Your Staked Ethereum?

 

JPMorgan maintained its neutral stock rating on Coinbase exchange, though it raised its price objective to USD 78 from USD 64.

 

Shares of Coinbase global (COIN) were trading at about USD 74.60 Friday morning, down by 2.6%. The share price is down by about 70% year to date.