Coinbase stock has 2 catalysts: is the CONY ETF a better buy?

Coinbase (COIN) stock price has staged a strong comeback in the past few days, rising to a high of $196.35, its highest point since August 27. It has rebounded by more than 34% from its lowest point in September, meaning that it is in a bull market.

Coinbase shares have risen by over 12% this year, while the YieldMax COIN Option Income Strategy ETF (CONY) has tumbled by over 50%. On the positive side, its total return has been 1.45%, helped by its substantial dividend yield. 

Coinbase is facing major headwinds

Coinbase, the biggest cryptocurrency exchange in the US, is facing major headwinds as prices remain on edge. 

While Bitcoin has done well this week, it remains substantially lower than its all-time high of $73,800. Other altcoins like Ethereum, Ripple, and Avalanche have also slumped in the past few months.

Third party data shows that Coinbase has lost market share against other global exchanges. Data by CoinMarketCap shows that Coinbase handled over $2.45 billion worth of cryptocurrencies in the last 24 hours.

Binance maintained the biggest market share, handling over $16.7 billion. Bybit handled $4.3 billion, while OKX processed coins worth over $2.7 billion. There are rising odds that other exchanges like Gate.io, HTX, and Upbit will pass Coinbase in the next few months.

These are notable numbers because Coinbase was once the biggest crypto exchange globally. It is also one of the most secure since it is under the Securities and Exchange Commission (SEC) supervision, and is audited by Deloitte, a big four auditor.

Most importantly, Coinbase’s infrastructure has been trusted by large ETF issuers like Grayscale and Blackrock.

The main reason why Coinbase has lost market share is likely because it normally takes longer to list new crypto tokens. It is not uncommon for exchanges like Binance, OKX, and HTX to list most new cryptocurrencies and meme coins on the same day.

The other challenge is that Bitcoin and Ethereum ETF inflows have slowed. Data by SoSoValue shows that Bitcoin ETFs have added over $19.36 billion in assets this year. While this is a good number, the growth has slowed. Spot Ethereum ETFs have shed over $541 million in assets.

Coinbase’s Bitcoin catalyst

On the positive side, there are rising odds that the Coinbase stock price will do well if Bitcoin stages a comeback. In most periods, the exchange sees more volume when BTC is doing well since such action leads to more volume.

Technicals suggest that Bitcoin may stage a strong comeback in the coming months. On the daily chart, it has formed an inverse head and shoulders pattern, a popular bullish sign. 

Bitcoin has remained above the 50-day and 200-day moving averages, and has formed a falling broadening wedge pattern. It has also avoided forming a death cross chart pattern. 

Polymarket users are upbeat about Bitcoin prices. A poll with over $534k in funds shows that there is a 64% chance that Bitcoin will retest and pass the all-time high of $73,800 later this year. Such a move will benefit Coinbase and its stock.

Read more: Bitcoin’s ‘Uptober’ rally kicks off, driven by market optimism and election bets

Base Blockchain is doing well

On the positive side for Coinbase, its Base Blockchain is doing well. Its total value locked in the DeFi industry has risen by over 56% in the past 30 days to $2.50 billion, while the amount of stablecoins in it has risen to $3.7 billion. 

Base has also become a leading player in the DEX industry. Data shows that its DEX networks handled over $5.6 billion in the last seven days, making it the third-biggest network in the industry.

Since its launch in 2023, Base Blockchain has overtaken popular blockchains like Cardano, Arbitrum, Avalanche, Polygon, and Near Protocol.

One way of monetising this business would be to launch its airdrop. Going by Arbitrum’s fully diluted market cap of over $5 billion, there are chances that Base token would achieve a valuation of over $6 billion. 

Besides, the recently launched EigenLayer is valued at over $6 billion, while Scroll, which is smaller than Base has an FDV of $1.27 billion.

Coinbase stock vs CONY ETF

For investors, there are two main approaches to invest in Coinbase. The most straightforward approach is to invest in Coinbase stock.

The alternative approach is to buy the CONY ETF, which uses options to maximise returns. It is a single-stock ETF that generates returns by both buying the stock and selling its call options.

CONY has one of the highest distribution rates in the industry since it has a distribution rate of 94.76% and a 30-day yield of 3.70%.

It pays a dividend every month. Data on its website shows that it made a payment of $1.04 in September, $1.006 in August, and $1.57 a month earlier. These numbers mean that its distributions are not regular. 

In most cases, when looking at the total return, investing in a stock is usually the better option compared to the ETF. As shown above, the COIN stock has risen by 161% in the last 12 months, while the CONY Fund has risen by 81% in the same period.

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