Coinbase, the largest cryptocurrency exchange in the U.S., has been attracting praise and criticism from various stakeholders in the crypto space. Some analysts see Coinbase as a potential index play for traditional finance firms (TradFi) who want to gain exposure to the crypto sector, while others question its execution and profitability.
In a Dec. 22 Space on X (formerly Twitter) hosted by Anthony Pompliano, Reflexivity Research co-founder Will Clemente said that Coinbase shares could serve as an index play for TradFi firms who are looking for a way to diversify their portfolios and access the crypto market.
Someone might come in the space and say, I bought some Bitcoin, I don’t really know which of these other assets to pick; Coinbase feels like a pretty safe kind of index style play, said Clemente.
Matt Hougan, the chief investment officer of cryptocurrency asset manager Bitwise, also shared his optimism over the future of Coinbase on the same Space on X. Hougan said that he thinks the exchange is executing better than any financial services company in America.
Bitwise operates a Bitwise Crypto Industry Innovators exchange-traded fund (ETF), which holds Coinbase shares. Clemente added that Wall Street views Coinbase as just a pure exchange but noted that it has launched other revenue verticals such as staking, becoming a Bitcoin ETF custodian, and acquiring part of Circle.
Coinbase As A Risky Investment
However, not everyone is convinced that the exchange is worth investing in. The exchange is still facing legal challenges from the United States Securities and Exchange Commission (SEC), which accuses it of offering unregistered securities through its lending program.
The crypto exchange is also facing regulatory scrutiny from several U.S. senators passing bills to restrict cryptocurrency activity in the U.S., which could impact its operations and growth prospects. Moreover, Base has been plagued by several hacks and exit scams since its launch, including the $6.5 million Magnate Finance rug-pull and the $865,000 exploit on RockSwap.
Additionally, Cathie Wood’s ARK Invest has been selling off its Coinbase shares since December 5. According to data from Wood’s official website, ARK’s ARK Innovation ETF has sold off over 900,000 of its shares since then.
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