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Are Coinbase shares a good way for me to get indirect exposure to cryptocurrency?


first_img Image source: Getty Images jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Bitcoin. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. There have been several large IPOs already in 2021. One of the most anticipated was Coinbase (NASDAQ:COIN). Its shares were listed under a month ago. It’s the second largest cryptocurrency exchange, and so carries forward the momentum of the industry in general. Over the past year, different virtual coins have seen big increases in value as investors have piled in. With Coinbase now being listed, is buying shares a smart way to get exposure to Bitcoin and other coins?What does Coinbase do?For some people, it might not be that easy to figure out what Coinbase does. It’s not a digital asset mining company, or a cryptocurrency. Rather, it’s an exchange platform. This means I could register on it to buy and sell cryptocurrency.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…In some ways, it’s like the London Stock Exchange, but for digital coins instead of stocks. Now you might think that it would be odd to buy Coinbase shares to get exposure to digital coins. After all, I wouldn’t buy shares in the LSE Group simply because I want to get exposure to stocks!Yet I think the correlation between Coinbase shares and Bitcoin (or other coins) is different. Coinbase at the moment is the only major listed cryptocurrency exchange. The vast bulk of revenue comes purely from trading fees from people buying and selling coins.For the moment, the performance of Coinbase as a company is very much tied in to the amount of activity and trading on the exchange. Put another way, the more people who buy or sell Bitcoin, the more revenue Coinbase will make from trading commissions.Will Coinbase shares mirror crypto moves?I’ve established that more trading activity is good news for Coinbase as an exchange platform. So in theory, it shouldn’t matter whether Bitcoin moves higher or lower, as long as there is trading activity through Coinbase. This is because it makes money through activity, which could be buying or selling. In the short term, Coinbase shares wouldn’t logically track the direction of a particular coin.This differs from the long-term view. If investors all sell out of Bitcoin and other coins, then over time, there will be very limited activity on the exchange, which would be negative for Coinbase shares.Sometimes, the logical doesn’t always happen. This is because people buy stocks for speculative purposes. For example, I don’t believe that the surge in the GameStop share price was due to company-specific performance.For Coinbase shares, if enough investors buy them speculatively for exposure to Bitcoin, then the share price will likely move in the same way as Bitcoin. There is nothing stopping investors buying and selling stocks regardless of a fundamental value. In my view, Coinbase shares should have a good correlation to cryptocurrency (Bitcoin in particular) due to speculative investors. But I’m an investor who prefers to buy shares in companies whose product — and future — I really believe in, rather than reacting to speculation. Personally, it’s too early for me to consider buying after the IPO. Recent volatility is very high, so I’m going to sit out until things settle down and I can see how the company is developing. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Our 6 ‘Best Buys Now’ Shares Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! “This Stock Could Be Like Buying Amazon in 1997” Are Coinbase shares a good way for me to get indirect exposure to cryptocurrency?center_img Jonathan Smith | Tuesday, 4th May, 2021 | More on: COIN I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by Jonathan Smith Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. 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