Coinbase Shares Have Been Stuck in a Range Lately. Here's Why That Might Not Change Anytime Soon.

The firm's shares rose more than 50% between the start of 2024 and March 25, when the stock hit a high of $283.48. Since then, shares have fallen 22% to $221 apiece.

Coinbase (COIN) shares have been trading sideways of late.

The stock soared more than 50% between the start of 2024 and March 25, when the shares hit a high of $283.48. Since then, the shares have slid 22% to trade around $221 apiece.

That’s despite the fact that the prices of Bitcoin and other cryptocurrencies have been on a tear. Bitcoin on Tuesday passed $73,000, up more than 18% from June 30.

Most of those gains occurred after the third quarter ended, and some analysts think Coinbase will report that trading on the platform in the quarter was largely stagnant. Oppenheimer analysts Owen Lau and Guru Sidaarth in a research note earlier this month said they estimate trading volume in the third quarter fell 23% from the quarter before.

Trading volume on Coinbase will continue to be buffeted by investors’ risk appetites. But company executives for more than a year have said they’re trying to diversify its revenues beyond trading with the goal of turning a profit no matter whether crypto traders are active or absent.

The company’s other revenue streams include staking, where investors utilize Coinbase to post their tokens in exchange for yield, which Coinbase takes a cut of. The company also makes money through its sponsorship of the USDC stablecoin, a kind of crypto pegged to the dollar and backed by reserves. The reserves, which are held in Treasuries and other safe assets, throw off interest, part of which goes to Coinbase.

Between the second quarter of 2023 and 2024, the company’s subscription and services revenue, which includes staking and USDC, rose 79% to $599 million.

One of the driving forces in the increase in revenue was rising interest rates, which let Coinbase earn more interest, but now that the Federal Reserve has begun to cut rates, those revenues could start to flatline.

USDC and staking have also drawn the attention of regulators, and the outcome of the November election could have at least some impact on how sustainable they are.

Former President Donald Trump has promised that if elected to the presidency, he will fire Securities and Exchange Commission Chair Gary Gensler and usher in a new era of pro-crypto policies in the U.S. Coinbase is among the crypto companies currently being sued by the SEC for allegedly operating as an unregistered securities exchange. Coinbase denies that it’s broken the law.

Though Vice President Kamala Harris is less likely than Trump to remove Gensler from his post if she is elected president, her campaign has said she’d support giving regulatory clarity to the industry.

A more friendly SEC could be a catalyst for Coinbase. The SEC in the past has taken the position that the vast majority of cryptocurrencies are securities, apart from Bitcoin and perhaps Ether, and must register with the agency—a process that crypto firms say is impossible to accomplish in practice. With most courts yet to decide whether the law is on the SEC’s or Coinbase’s side, that puts a huge swath of the firm’s revenue at risk. A new SEC chair could choose to pull back on the lawsuits, or not pursue new ones.

While more than a third of Coinbase’s transaction volume comes from Bitcoin trading, so-called alt coins represent an increasingly important area where Coinbase makes money. In the second quarter, crypto assets other than Bitcoin and Ethereum accounted for 42% of the company’s transaction revenue, up from 39% in the second quarter of 2023.

The company has also launched derivatives trading for foreign customers, an offering that company executives have said are an important growth area for the future. Last quarter, Coinbase did not break out separately what it had earned from derivatives but said that they had contributed to growth in transaction revenues.