Coinbase Exchange to benefit near term from staking revenue post Ethereum merge, according to Goldman
The Ethereum Merge will likely be a near-term catalyst for greater adoption of staking on Coinbase (COIN) platform, Goldman Sachs (GS) said in a research report on 7th September.
Coinbase Exchange has continued to grow its staking offering and recently announced support for institutional clients, adding staking for cardano (ADA) and solana (SOL), and will eventually support ether (ETH) after the Merge, Goldman analysts led by Will Nance wrote in a research report.
The Ethereum Merge, which is the Ethereum blockchain switch from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, is the first of five planned upgrades for the Ethereum blockchain network and is expected to happen next week.
Goldman Sachs sees Coinbase Exchange generating $250 million to $600 million in additional staking revenue from ether staking, assuming that around 20% to 40% of the Ethereum on its platform is staked.
Also Read: How Coinbase Exchange Protects Users From Risky Assets
The Goldman opinion joins a similar JP Morgan report, which stated last month that Coinbase exchange is in a position to be a “meaningful” beneficiary of the Ethereum Merge as the exchanges staking offering will drive revenue for the firm.
Goldman also anticipates upside from higher interest rates from USD coin (USDC), and it further noted that as the sole retail issuer of USDC, Coinbase Exchange gets a share of the interest income generated from the USDC reserves. Given that interest rates are expected to reach over 3.5% over the next few quarters, the market is undervaluing the roughly $400 million to $680 million worth of “boost to subscription income and services revenues and ultimately Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization excluding non-recurring expenses).”
Despite these positive revenue catalysts, the bank maintained its sell rating on Coinbase Exchange shares and its price objective of $51, citing weakness in its fundamental business model.
Also Read: Congress Questions Major Crypto Exchanges Over Fraud Crackdown
“We remain sell rated as we believe the profitability view is likely to remain weak given the depressed crypto trading environment and the companys target for roughly break-even margins over the intermediate term,” the bank is analysts wrote.
The shares of the Cryptocurrency Exchange Platform have fallen more than 70%, while Bitcoin lost about 60% of its value this year, as per TradingView data.
At the time of writing, Coinbase Exchange is shares were trading at $75.25.
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