JPMorgan Upgrades Coinbase on Base Network Monetization

JPMorgan’s upgrade centers on Coinbase’s strategic pivot toward monetizing its Base Layer-2 technology, which the bank believes represents a transformative opportunity for the cryptocurrency exchange. According to the analysis, the potential launch of a Base token could create a massive $12 billion to $34 billion opportunity, with Coinbase retaining between $4 billion and $12 billion of that value. This projection underscores the significant revenue potential embedded in Coinbase’s expanding ecosystem beyond its core exchange business.

The bank’s analysts noted that Base token distribution would likely favor developers, validators, and the broader Base community, creating an ecosystem-driven value proposition. Additionally, JPMorgan highlighted Coinbase’s integration of a DEX aggregator within the Base app as a strategic move to hedge against the growing competition from decentralized exchanges. This dual approach—building native ecosystem value while protecting against market share erosion—positions Coinbase to capture multiple revenue streams from the evolving cryptocurrency landscape.

Beyond the Base Network opportunity, JPMorgan identified significant margin expansion potential through changes to Coinbase’s USDC rewards program. The bank’s analysis suggests that by reducing interest rewards for most users and offering them primarily to Coinbase One subscribers, the exchange could add approximately $374 million in annual earnings at current USDC interest rates and yields. This strategic shift would effectively optimize the company’s reward expenditure while driving premium subscription adoption.

The USDC strategy represents a sophisticated approach to balancing customer acquisition costs with revenue generation. By concentrating benefits on the higher-value Coinbase One user base, the company can enhance customer loyalty while improving profitability metrics. This comes as Coinbase has been focusing on its subscription and services segment, with analysts expecting the segment to contribute between $665 million and $745 million in the third quarter alone.

The immediate market response to JPMorgan’s upgrade was emphatic, with COIN shares rallying over 9% to reach $353 following the announcement. This surge extends the stock’s impressive year-to-date performance, which now stands at approximately 42%, pushing Coinbase’s market capitalization past the $90 billion threshold. The positive sentiment reflects growing investor confidence in Coinbase’s ability to diversify revenue streams beyond traditional trading fees.

Attention now turns to Coinbase’s upcoming third-quarter earnings report scheduled for October 30. According to Zacks Investment Research, analysts expect the company to post earnings of $1.06 per share, representing a 71% increase year-over-year, alongside revenue of $1.74 billion, a 44.1% increase from the same quarter last year. These projections follow a mixed second quarter where Coinbase missed earnings expectations but achieved operational milestones including higher stablecoin revenue and rising stablecoin balances.

The broader regulatory environment also appears supportive, with the recent approval of the GENIUS Act establishing a clearer framework for stablecoin adoption in the United States. This regulatory clarity, combined with Coinbase’s strategic initiatives around Base Network and USDC optimization, creates a favorable backdrop for sustained growth as the company continues to evolve from a pure-play exchange to a comprehensive cryptocurrency ecosystem platform.