Coinbase Extends its Loan Against Bitcoin Service to More States, COIN Share Price Records an Uptick
Meanwhile, an investment bank report calls for “significant pricing degradation” due to no structural barrier to entry and despite Coinbase “hyperaggressively working to expand and diversity its sources of revenue.”
The biggest cryptocurrency exchange in the US, Coinbase, has expanded the number of states where US customers can borrow cash against their Bitcoin.
Now, more Bitcoin holders can use their cryptocurrency as collateral and borrow as much as 40% against them without having to sell their BTC and incur a taxable gain or loss. As per the Coinbase website, one can borrow up to $100k from the San Francisco-based exchange with a 7.9% APR without requiring a credit check.
Line of credit offer is currently available to residents of Arizona, California, Idaho, Ohio, and Tennessee.
As for fixed-term loans, they are available to the residents of Alaska, Arkansas, Connecticut, Florida, Illinois, North Carolina, Nebraska, New Hampshire, New Jersey, New York, Oregon, Texas, Utah, Virginia, and Wyoming. Here, you can borrow up to $100k with an 8% APR.
Meanwhile, the price of COIN shares is seeing an uptick in line with the gains recorded by Bitcoin, which dropped to $31,000 on Tuesday and is today back above $38k.
While moving above $224 COIN share prices are still down from their opening level of $381 on April 14 and the highs of about $430 per share the same day.
However, according to Analyst Patrick O’Shaughnessy, a fair market price for COIN would be approximately $95 per share.
Substantial momentum But no structural barrier to entry
A Raymond James report written by O'Shaughnessy, David Farnum, and Michael Vinci, which was published Tuesday, gave Coinbase an ‘underperform’ rating.
The analyst argued that Coinbase would be facing the same struggles as traditional brokerage firms. Strong competition for the leading exchange is inevitable, leading to the shrinking of Coinbase’s healthy fees charged to customers, which will hold down its stock value.
“Coinbase is currently enjoying substantial momentum,” wrote the Raymond James team, adding, “the vast majority of its revenues currently come from trading commissions and over and over again history has shown that brokerage and exchanges see excess profits competed away unless there is a structural barrier to entry.”
Just last week, Robinhood touted its low to zero transaction fees as a selling point in the growth of its crypto trading operations. With each passing day, new entrants continue to join the crypto space, not to mention the fast-growing decentralized finance (DeFi) sector is a big threat as well.
With no structural barrier to entry here, O’Shaughnessy expects a “significant pricing degradation over time, with growth in non-transaction revenues hard-pressed to offset this,” despite the exchange “hyperaggressively working to expand and diversity its sources of revenue.”
Coinbase has about 56 million verified users, and in April, the company reported that 9.5 million customers are trading crypto compared to 1.7 million in Q4 2020.