In the Crypto market in June, the hottest thing was not Bitcoin, not altcoins or memes, but Circle (CRCL). Since its IPO, it has skyrocketed more than 7 times, breaking the circle globally, becoming a rare leading cryptocurrency stock in the US stock market. However, just as hot money from traditional finance and cryptocurrency markets poured into Circle, Cathie Wood, who is known for betting on technology growth, chose to do the opposite, reducing her holdings of CRCL and increasing her holdings of Coinbase (COIN).
According to Ark Invest Daily data, Cathie Woods ARK Invest sold 415,844 shares of CRCL on June 23, with a total value of about $109.5 million based on the closing price of the day. At the same time, it increased its holdings of Coinbase by 20,701 shares in one day, now worth about $7.14 million. It also increased its holdings of Shopify, which has a deep cooperation with Coinbase, for two consecutive days on the 23rd and 24th, buying a total of 146,487 shares, now worth about $16.76 million.
Ark Invest currently has an investment of nearly $900 million in Coinbase and about $500 million in Shopify, which together account for about 12% of ARKs portfolio.
ARKs list of increases and decreases on June 23, source: Ark Invest Daily
Although the surge in CRCL reflects the long-term optimism about the stablecoin payment track, Coin, as the intersection of its underlying settlement ecology, on-chain network and user-end traffic, seems to be closer to the essence of this round of narrative. Not only that, Coinbase is also one of the largest shareholders of Circle, holding about 50% of the latters shares. With all these advantages, is the value of Coinbase underestimated?
Comparison of the growth rates of CRCL (above) and COIN (below)
Cooperate with 200 financial institutions?
On June 24, at the just-concluded semi-annual monetary policy report hearing of the U.S. House of Representatives Financial Services Committee, the Federal Reserve finally gave in. Chairman Powell said that banks can provide banking services to the cryptocurrency industry and conduct related businesses, provided that the safety and soundness of the financial system is ensured.
On the next day, on the 25th, Coinbase founder and CEO Brian Armstrong released Coinbases new infrastructure Crypto-as-a-Service, CaaS (Encryption as a Service), and said that it has cooperated with about 200 banks, securities firms, financial technology companies and payment institutions around the world.
This CaaS system covers the entire process from asset custody, trading, lending, stablecoin integration to on-chain tokenization. For banks, Coinbase provides a regulatory-compliant, scalable and flexible wallet system and asset management tools. Its custody solution has vault-level security and supports self-management of private keys.
At the transaction level, Coinbase supports access to CFTC-regulated crypto perpetual contracts, helping banks build compliant spot and derivatives businesses. More importantly, Coinbase provides trade financing capabilities without prepaid funds, and provides complete upstream and downstream services in the use of stablecoins, from payment to foreign exchange settlement to on-chain issuance, to achieve full-cycle access.
For brokerage firms and exchanges, Coinbase also provides institutional-grade custody services and one-stop transaction execution capabilities, allowing partners to access cross-platform liquidity with Coinbase Prime, and provide real-time quotation services and inquiry transactions. It also supports trade financing, stablecoin integration and pledge income infrastructure, and has a white-glove service desk that provides customized execution services for high-net-worth and complex orders.
Base Chain and USDC, the left and right arms of Coinbase
Earlier this month, on June 13, Coinbase announced several good news at the same time. First, it announced a partnership with Shopify to support USDC payments on the Base chain in more than 30 countries around the world, truly opening up the settlement scenario of stablecoins on mainstream e-commerce platforms for the first time; at the same time, Coinbase officially connected the DEX routing on Base to the main application, allowing users to complete on-chain transactions without leaving their CEX accounts.
Coinbase is currently one of Circles largest shareholders, holding nearly 50% of its shares, and is also the only issuing partner of USDC. Coinbase is standardizing the use of USDC and promoting it as a settlement tool for cross-border and local payments. Through real-time settlement, floating fund management tools and fiat currency access services, Coinbase is helping traditional payment institutions upgrade to a new generation of platforms that support encrypted payments. It is particularly noteworthy that Coinbases integration of USDC is not limited to the asset level, but has reached cooperation with leading e-commerce platforms such as Shopify, which has substantially promoted the implementation of USDC in the real e-commerce system.
The foundation of all the above layouts is Coinbases Ethereum Layer 2 underlying public chain Base. Coinbases multiple initiatives encourage customers to deploy tokenized assets and DeFi applications on Base. Backed by compliant exchanges, low fees and support for fast 24/7 settlement, it provides an ideal environment for traditional institutions to test on-chain businesses. USDC accounts for 90% of the total stablecoin supply on the Base chain, so the more active the Base chain is, the more widely CIRCLE will be adopted.
USDC accounts for over 90% of Base’s stablecoins. Source: DUNE
As Coinbase is reintegrating on-chain liquidity, compliant payments, and high-frequency trading into a complete ecosystem and combining them in a regulatory license manner, the current Coinbase may not only be a compliant exchange or ETF target, but it is building an operating system that is gradually adopted by mainstream finance with CaaS and Base.
Deribit + CFTC Perpetual License, Spending Big Money to Make Derivatives Compliance
Due to the high cost of compliance, the decline in transaction fees and institutional business in the last quarter is an established fact for Coinbase, which has a limited revenue model. However, derivatives, especially legal U.S. market perpetual contracts, are an incremental market that has not yet been fully opened.
Therefore, Coinbase has taken a series of measures, the most important of which is its announcement in June that it will launch a 24/7 perpetual futures contract function in the United States that complies with the requirements of the Commodity Futures Trading Commission (CFTC) this year. Prior to this, on May 9, Coinbase had initially launched Bitcoin and Ethereum futures trading in the United States through its CFTC-regulated exchange Coinbase Derivatives, LLC (formerly the CFTC-regulated derivatives trading platform FairX). Also in May, Coinbase completed the acquisition of Deribit, one of the worlds largest cryptocurrency options exchanges. At this point, Coinbase began to join the competition in the top derivatives market.
Deribit has a strong influence in non-US markets (especially Asia and Europe), and the acquisition has given it a dominant position in Bitcoin and Ethereum options trading, accounting for about 80% of global options trading volume, with daily trading volume maintained at more than $2 billion. At the same time, 80-90% of Deribits customer base are institutional investors. Its professionalism and liquidity in the Bitcoin and Ethereum options markets are highly favored by institutions. Coinbases compliance advantages and the already perfect institutional ecosystem make it more suitable.
After the compliance cleanup a few years ago, no exchange in the US market launched compliant derivatives for a long time, and the US market has always been a hot commodity in the eyes of exchanges. However, for US players, CME only serves institutions, Binance cannot comply with regulations, and Hyperliquid, which has taken away about 20% of Binances derivatives market share, is the main choice for most US traders. However, the market may also be swallowed by Coinbase. As the only US platform with user scale, compliance qualifications and technology stack, it has become the exclusive channel for legally opening contract trading in the US market.
This series of operations is its response to the decline in financial reports in the previous quarter. Its earnings per share (EPS), revenue, and platform revenue all declined collectively in the previous quarter. Compared with spot trading, which is more affected by the market, contract trading is a more stable source of income.
The value of Coinbase lies not in its current price but in its structure
Although Coinbase only gets a small part (about 34%) of USDCs 60% interest income, the economic landscape covered by its on-chain settlement, payment entry and DEX routing is more extensive than CRCL. ARKs position adjustment behavior also confirms this logic. Reducing CRCL is to lock in profits, and increasing positions in Coinbase and other surrounding ecological targets is to bet on its on-chain ecological integration capabilities. Coinbase also announced its next stage goal a few days ago, focusing on promoting the large-scale adoption of cryptocurrencies and dividing its development into three stages.
The first stage is to view cryptocurrency as a new type of investment platform, starting with Bitcoin and gradually expanding the list of assets.
The second stage is a thorough update of existing financial services. It is no longer just replacing the old system with a new interface, but rebuilding a new financial system with crypto-native as the core from the bottom up. This includes DeFi lending collateralized by Bitcoin and cross-border payments based on stablecoins. Services emphasize the freedom and power of users to regain control of their own assets.
In the third phase, Coinbase intends to evolve the platform into the infrastructure for the next generation of Internet applications, allowing value to flow directly to real creators and users.
When Base is responsible for traffic entry, DEX provides asset flow, USDC is bound to payment scenarios, and perpetual contracts take over high-frequency transactions, Coinbases form has surpassed the exchange itself, and now it is more like a compliant on-chain App Store.
Value discovery is often not because of cheapness, but because of the right structure. And Coinbase may be that asset with the right structure.
