The New Crypto Stack: Coinbase, Bitcoin, Stablecoins

Headed by Brian Armstrong, Coinbase Global (NASDAQ: COIN) is the largest U.S.-based cryptocurrency exchange. As such, Coinbase is the dominant custodian for most Bitcoin ETFs; from BlackRock’s IBIT and Grayscale’s GBTC to Invesco’s BTCO and Bitwise’s BITB.

Globally, however, Coinbase has a middling crypto footprint, at 5.58% market share. This is adjacent to Huobi, ByBit, Gate.io, Crypto.com and OKX, all of which exist in the shadow of Binance with 34.41% market share, according to January’s The Block data.

Bitcoin finished 2025 in the negative performance zone, at 17.2%, marking the fourth negative Bitcoin year since 2012. In the absence of FTX-like calamities, which made Bitcoin finish 2022 with a 62% loss, the 17.2% loss for 2025 is minor.

However, does Bitcoin’s underperformance compared to gold and silver indicate stagnation moving forward? Let’s examine Coinbase’s latest Charting Crypto report for Q1 2026.

Crypto’s Institutional Outlook

Encompassing data up to January 12th, Charting Crypto is Coinbase’s quarterly report, jointly made with Glassnode and Coinbase Institutional. Based on the survey of 75 institutions and 73 non-institutions, the prevailing sentiment is that the crypto market is in its bear stage.

Compared to September data, when institutional investors believed the market in late bull stage, at 45%, only 21% still hold that view. As of late December, 26% considered the crypto market cycle to be in a downturn, while 23% thought it was in the accumulation stage.

By the end of H1 2026, 40% of institutions view Bitcoin as the crypto vanguard, likely to increase its market dominance over 60%. The majority, at 44%, think Bitcoin’s dominance will hold within the 55-60% range. At press time, Bitcoin dominance is holding at 59.1% against altcoins led by Ethereum (11.8%).

After the early October market crash, catalyzed by President Trump’s tariff threat against China, the institutional investor outlook drastically shifted. In September, 33% thought Bitcoin dominance would decrease by mid-2026. After the crash, only 16% hold that view.

This is unsurprising as the ease with which cryptocurrencies are created continually erodes investor attention and capital allocation. According to CoinGecko, there are now nearly 18,000 coins on the market, the vast majority coming from proof-of-stake (PoS) networks like Ethereum and Solana.

Bitcoin stands apart with its proof-of-work (PoW) model, anchoring its digital nature to hard assets via computing power and energy. Yet, despite mimicking gold’s scarcity in a cryptographic manner, Bitcoin’s correlation with another fiat hedge – gold – remains low to negligible.

In the meantime, Coinbase’s Base, as Ethereum’s L2 network, became dominant alongside Polygon and Arbitrum. The recreated financial services in blockchain form continue to rise, as evidenced by ETH and L2 transactions within a three-year span.

Ethereum’s DeFi ecosystem is slowly maturing as viable. Just as transactions hit a new all-time high prior to October crash, ETH-associated fees hit a multi-year low from the Pectra upgrade in May to the latest Fusaka upgrade in early December.

Nonetheless, being highly correlated with Bitcoin, the entire altcoin market dropped from optimism in Q325 to extreme fear in Q425. Moving forward, the macro landscape appears to be the determining factor for both crypto fundamentals and Coinbase’s bottom line.

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Macro Tailwinds or Headwinds

When covering the prospects of Super Micro Computer, Inc. (NASDAQ: SMCI) last June, we noted that it is likely that toppling Iran will be a major macro event moving forward. Since then, President Trump has demonstrated in no uncertain terms that all of his political capital is expended in the pursuit of Israeli-aligned interests.

Given the strategic importance of the Strait of Hormuz, as the world’s oil transit chokepoint, this may be the black swan that turns over the crypto cart this year. Absent of it, Coinbase’s Charting Crypto sees a positive macro setup for 2026. Specifically, Atlanta Fed’s GDPNow model, as of the latest Monday estimate, projects 5.4% growth rate.

Combined with December’s steady inflation rate of 2.7%, the Federal Reserve is likely to deliver two rate cuts this year, totaling 50 bps, according to CME Group’s probability data from Fed fund futures. Cheaper access to capital would benefit risk-on assets like Bitcoin. Moreover, there may be capital rotation from gold to Bitcoin ETFs, as most (71%) institutional investors see Bitcoin as undervalued.

Additionally, Bitcoin is ripe to catch up with M2 money supply, given its historic ~0.9 correlation.

Lastly, it bears noting that President Trump’s “mass deportation” narrative is entirely theatrical, much like the previous “lock her up” refrain. The function of daily ICE spectacle is to bury this talking point as viable moving forward. Under a genuinely effective governance model, any attempt to reverse radical demographic transformation would rely on structural action.

Specifically, the administration would’ve enacted financial deplatforming, high remittance tax, and employer enforcement regimes. None of this is applied in any meaningful manner but quite the opposite. Within the alternative reality of effective governance, the ICE street action would’ve been entirely peripheral.

That is to say that, the asset-holding class benefits greatly from wage growth suppression, higher tolerance for poor conditions and segmented labor markets. Likewise, the housing market remains stable with maintained high demand.

The upside is that these drivers keep Bitcoin narratively alive as an escape/speculative valve in the emerging K-shaped economy. To put it differently, Bitcoin benefits from continued capital exclusion rather than mass adoption.

Coinbase’s Business Model and Price Targets

Coinbase is scheduled to deliver its Q4 2025 earnings on February 12th. In the last Q3 report, the company increased its net income nearly six-fold, from $75 million in Q3’24 to $433 million. Year-over-year, Coinbase’s total translation revenue nearly doubled to $1 billion.

In addition to core transaction revenue of $1.046 billion, the bulk of the company’s revenue comes from subscription and services revenue, at $746.7 million. Coinbase’s stablecoin revenue has gradually been increasing every quarter, rising to $354.7 million in Q3. As stablecoins become primary drivers of the dollar hegemony in lieu of a CBDC, weakening the Euro in the process, Coinbase is only to benefit further.

This will largely depend on the finalized CLARITY Act. The banking sector halted its progress for the moment, as it would grant advantage to companies like Coinbase due to the offering of yield-bearing stablecoins. Moreover, the company’s Base protocol within the Ethereum ecosystem would indirectly benefit Coinbase as stablecoins like USDC and USDT would no longer sit idle.

Instead, they would be employed in activity-based rewards. And every time someone makes a trade or payment on Base, they pay a small fee. Even without the CLARITY Act, Coinbase grew this segment – blockchain rewards – nearly 20% year-over-year to $184.6 million revenue in Q3.

Trailing twelve months, Coinbase has a price-to-earnings (P/E) ratio of 18.48. At the current price level of $209, COIN stock price is above its bottom price target of $190, but significantly below its average price target of $345 per share.

Half its all-time high of $419.78 in July 2025, COIN stock is nearly as deflated as stablecoin issuer Circle (CRCL) over the last three months, at -42% vs -52% respectively.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.