Why Coinbase Is No Longer Just a Crypto Brokerage shares Artemis Research Analyst Alex Weseley

Wes, thanks for joining. Welcome to the show, and thank you for coming on here pretty last minute. But we we came across this really interesting article that Artemis put out yesterday on why Coinbase wins in an AI native finance world. We've been working with the Artemis team, you know, doing some stuff on the data side on the back end of our business. Andrew and team have been regular guests on the show. Maybe as we kick off into this article, give us a bit of your your role at Artemis, and then we can dive into

what specifically this article gets into. Yeah. Sounds great. First of all, let's be on the the TBPN of of crypto. Yes, sir. TBPN of money. We're going broad. We're going money. But, yeah, my name's yeah. Alex, I'll say go by Wes because there's there's two Alex's at the office, But I've I've been working mostly on the sort of data research intersection for the past two and a half years at Artemis.

So everything from building data pipelines and understanding protocols to, you know, writing research in our our sort of weekly weekly newsletter and things like that. And, yeah, I was I was involved in how helped co write this Coinbase piece that we put out last week to yeah. Quote quite a bit of engagement. I think people it resonated. People liked it. Some people were like, you know, is it the finance BS, etcetera, etcetera. But Why did this get so much buzz?

Was it slightly hot take, or what what created that sense of traction? Yeah. I I guess it's, like, slightly a hot take. I think what most people think of, you know, identity finance, maybe they think of USCC, and they think of Circle, and maybe they think of Stripe and Tether. Coinbase maybe isn't the first name that comes to mind. So framing sort of this AI native finance world around Coinbase, think maybe it was like a fresh perspective that resonated

with people. Yeah. So let's let's get into this specifically. I actually I've popped up some of these, like, specific data graphs and things that that you guys shared here. What is the what is the case here?

I mean, we see Coinbase getting a ton of pressure generally in terms of their trading business and their trading volumes, but it sounds like, you know, from from your perspective, this is a narrow view that misses, quote, the long term upside of Coinbase in a world of $3,000,000,000,000 of stablecoin supply, $5,000,000,000,000 of Agenza commerce by 2031. What yeah. Give give us a bit of this thesis and how you think about the bigger opportunity. Yeah. I mean, you you nailed it.

So we we believe the market largely views

Coinbase as a crypto brokerage and, yeah, this value is just sort of on on trading revenues and transaction revenues. And I think if you look at, you know, historical price action, that's certainly been the case. Even more recently, if you compare Robinhood to to Coinbase, price action is very similar. And, really, what they have in common is sort of this trading business line, if you will. But in reality, you know, about half of Coinbase revenue comes from the subscription and services.

About 300,000,000 this past quarter came from just stablecoin sort of reserve income and their deal with with Circle.

And we believe that the the stack they're building with with Base, they help incubate x four zero two and sort of had a lot of developer tooling and infrastructure built around that as well as sort of their their revenue sharing business relationship with Circle and USC positions them really well for a world where AI is the primary or, you where AI agents are the primary transacting, I guess, of the Internet and and finance. You know, of course, this is very forward looking.

We're looking at just sort of 2031 and anchoring around predictions, you know, made by some reputable folks. I think Bain's secretary of treasury estimating about 3,000,000,000,000 stablecoin supply by 2030, 2031. He's estimating about 5,000,000,000,000 in agentic commerce by 2031 as well. So kind of we use that as as some anchors

and and lay out the thesis that Yeah. I think this is the this is the graph you're talking about. Right?

Yes. Alright, let's get into this. This was one that definitely stuck out to me. Walk us through this. Yeah, I mean, so I think there's two main things to look at here. You've got total stablecoin supply, which we're predicting hitting 3,000,000,000,000 by 2031 as a little bit more conservative versus 3,000,000,000,000 by 2030. And, you know, we think USCC could capture 30% of that market being sort of the the largest regulated, sort of genius compliance stablecoin in The US.

Today, it's already sort of kind of got that moat and strengthened, so we see that sort of compounding over the years, and potentially

growing to 30% market share in the next in the next five years. Yeah. And speaking of Circle, one other one that you you pulled here was the comp against Circle, and this was a really interesting one too. What do you see here? Yeah. I think the the point we're trying to make here is,

Circle is certainly seen as a pure play stablecoin bet, and that is shown as commanding a higher premium, at least on sort of an enterprise value to the next twelve month earnings multiple, about two x that of Coinbase. And we think, you know, Coinbase is very exposed to the stablecoin tailwinds, and frankly, the value should likely be much much closer. Like, I'm not sure Circle should command such a higher premium over over Coinbase. Yeah. It says here,

looking at this chart, Coinbase is the number one holder of USDC and growing versus competitors. So compared to those kind of benchmark like, the benchmark ones that we have here, looking at some of these, the you know, you have bullish Robinhood, CME, Circle. The actual custody and and ownership of that network or that that asset is extremely I mean, you would expect that given their relationship to the to USDC and to Circle. What do you see?

Do you see do you see this being something that will continue, or how do you see this trend line? Yeah. I mean, I think this is probably one of the more important

charts for for Coinbase, you know, insofar as they get a 100% of the stablecoin yield on on platform from Coinbase. Yeah. And about about half half of, like, the residual revenue on off off platform. So obviously, the mod there was a monetize on platform significantly higher.

What a great shout out to Jim Migdal who closed that deal. That was like, oh my god. The best I mean, that's just like it's such a sweetheart deal. A 100% of all the yield on the platform is able to be kept by you. I mean, that's just that's a great no wonder they're holding so much. Yeah. Yeah. And, I mean, it's obviously mutually beneficial. It's, you know, Coinbase is the number one exchange in The US, and the the SEC is getting a lot of distribution through them.

So I think it's sort of reinforcing sort of the the flywheel on both sides. Something Go ahead. Maybe maybe to shift gears. You mentioned x four zero two, and some of the charts here that seemed really interesting was x four zero two and on chain AgenTic payments and where they're settling. What are you what are you guys seeing right now in terms of just, like, maybe even broadly AgenTic payments on either Base or x four zero two.

We've we've kind of seen an interesting couple months here of, like, what's actually happening on chain, what's real, what's not. I think Artemis has been really clarifying in some of that. What are you seeing currently in terms of the the Base x four zero two involvement

with this stuff? Yeah. I mean, this is one of the more nascent, I think, verticals in a finance Maybe

this one would be a better chart. Looks like real Agencik payment volume on x four zero two versus other protocols. This is pretty stark. It's a

lot of blue. A lot of blue here. Yeah. I mean, like, x four zero two's been around, I guess, the longest. Really, other, I believe, is familiar composed of MPP, Stripe's payment protocol, which launched in March. So still very early, but what is clear is that people that are building agentic payments, agentic commerce applications really only had one choice for a long time.

Potentially, those early mover advantages could compound for x four zero two, and we see, like, a lot of this payments activity happening on base, like, given the x four two was incubated by Coinbase. So, yeah, like, I think, you know, having sort of the shared payment protocol, shared settlement layer, these things compound over time as liquidity, you know, moves to base as applications are built around, you know, the x four zero two payment protocol, use USCC.

These things definitely all compound to to Coinbase Circle as well.

Yep. I'm thinking Very early. But Yeah. This is probably the maybe this will be the last one we we pop up here and rapid fire you with, but this this seems seems to me to be one of the most, like, you know, bring it all together slides. Like, what and and making the claim, you know, around Coinbase, the revenue opportunity.

Maybe let's close with this and and how this comes together. Yeah. So I guess the the the point of this graphic we put together is to just really illustrate visually how Accomplis could potentially monetize the rise of AgenTek Commerce. So the primary revenue driver would be, you know, AgenTek commerce serving as a vector for growth for USDC, and Coinbase obviously being able to monetize that growth in USDC float.

But again, if this activity takes place on base, which you're seeing it happen on base today, that could lead to, you know, an incremental $102,105 100,000,000 in in sequencer revenue paid to to the base sequencer. And, you know, they they've already got a suite of products around agentic workflows, whether it's agent kit, wallet infrastructure, their agentic market routing. And so I think there's a lot of ways to get creative around monetizing that layer as a sort of a platform and marketplace. Yeah.

And so Coinbase developer platform,

popping this up here, it looks like so this is their I mean, it's been a minute since I've looked at this. So this is really the like, where all of this comes together for them. Got got some some big names here building on top of this, and it's kind of bringing together a lot of what they have. Payments, trading, wallets. X four zero two is probably popping up here somewhere. But how do you see, Wes, from your standpoint?

Who's the biggest challenger to Coinbase right now in terms of, like, you know, who who's who's running a similar race? And from a volume standpoint, who are you seeing is gonna, you know, challenge them here or fight to get some of that market share from them? Yeah. I mean, I think this will be a highly contested space circle.

Announced You earnings. They also announced their agent SAC yesterday, or was it? Yeah. So I think Circle's coming for a slice of this pie. Stripe, of course, one of the largest payments processors in the world, has MPP and a massively existing user base. So they will certainly be trying to Yeah. Get to it might as well. It's interesting is like, you know, x $4.00 2 and USDC are kind of the the native assets for both of these. Right? Like, have what Circle's doing here.

It's kind of a power move to see this. I we haven't we haven't dove deeply into this, but I was looking at this last night. Would you consider it sounds like this is kind of a similar approach to x $4.00 2 just coming from the Circle vantage point. Yeah. I honestly haven't looked at it too deeply. Kind of,

on a quick glance, seemed sort of like maybe a competitor to the agentic marketplace that Columbus had put together,

and maybe just some developer tooling around I really like the way that like, looking at this website, I really appreciate the way that they're visualizing what agents are doing and how Yeah. Payments and micropayments fit into it. And then actually bringing yeah. Like, these specifically, like, some of these use cases here that they're that they're showing on this website. Like, we're we're at such a nascent part of this industry.

Like, showing what is possible, I think, is such an important part of getting adoption for these things. So I'm excited to see more of this come to life. It's interesting too, Wes, just seeing you pop up that potential for float earnings,

and we've got this very, you know, futuristic, agentic payments, cutting edge. Right? And then, like, float is an old business. Right? Like, Warren Buffett was buying GEICO fifty years ago because he was so obsessed with float. But seeing, like, the market share of that and of, like, shit. Like, you got 200,000,000,000 If Coinbase, if they're getting 1.5%

of that, like, that's a $3,000,000,000 revenue right there. Like, that's an exciting thing. And it's like seeing how even amidst these, like, crazy innovations, there's simple old business models that just work. And I I like how you're, like, combining the old and the new and sort of saying, and that's how they'll win. Yeah. I mean, being able to sit on treasuries is one of the the the better business models out there. Cool. Thank you for walking walking through this.

And please, like, let us know when more of these kind of, like, data graph heavy stuff hits hits the timeline that you're working on. We'd love to be a part of exposing this and getting into the weeds. Is there anything that we missed or key takeaways from this article specifically or even more macro, like stuff that you're seeing on the research side as you're analyzing just so much so much data

on at Artemis that you wanna call out before we part? No. I think you guys covered it really well with the the the graphics you guys picked out on the research side. Yeah. I think, you know, I think everybody's leaning into agenda commerce massively, and I think we'll continue to see that that growth through the year. I think the the story will continue to be stablecoins, agenda commerce, tokenization. But, yeah, thank you guys so much for having me. That was a good time. Yeah, man. Wes, thanks for joining. Wes.

We'll have we'll have you back. Shout out to Artemis.