Just a year ago Coinbase Global (MONEY 2.02%) It was trading around $75 per share. Fast forward to today and it has seen a massive rise to roughly $210.

For those who joined me to invest in Coinbase last two yearsYou are already enjoying significant gains. But there is reason to believe Coinbase could climb even higher next year as it is positioned to benefit from both emerging revenue streams and the potential bull market in the cryptocurrency space. Let’s investigate why.

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Diversifying revenue streams beyond transaction fees

If you’ve been following my coverage (or any analysis of Coinbase), you’ll know that the company has made significant progress in diversifying its revenue model over the past few years, and that’s been a major factor behind its impressive stock performance.

Traditionally, Coinbase has generated the bulk of its revenue from transaction fees, a model that is highly dependent on transaction volume and vulnerable to market fluctuations. Recognizing the need for stability, Coinbase began creating additional revenue sources, primarily stablecoin revenue, which is currently the second most lucrative segment.

Coinbase stablecoin The business has grown over the past two years, benefiting from its partnership with its issuer, Circle. US Dollar Coin. With higher interest rates, Coinbase used funds from USDC buyers to invest in Treasury bills, which provide better returns during interest rate hikes.

This strategy paid off, with stablecoin revenue reaching a record high of $250 million in Q3 2024. Federal Reserve carries out an interest rate reduction cycle next year.

But this is where Coinbase’s diversified revenue model will start to shine. While the decline in rates could reduce income from stablecoins, it could also trigger a new crypto bull market.

As interest rates fall, the cost of borrowing decreases and liquidity in the economy tends to increase. Historically, a low interest rate environment encourages risk appetite, which often leads to greater capital flows into riskier assets such as cryptocurrencies (as seen in the 2021 bull market when the rate was almost 0%).

Other revenue streams that are closely tied to cryptocurrency prices and market activity (such as transaction fees, blockchain rewards, and custody services) could begin to see significant growth, with Coinbase predicting that market rate cuts will peak by mid-2025. next year.

How high can Coinbase go?

There is one metric that can help us evaluate Coinbase’s potential in 2025: exchange volume. An important metric that helps us gauge the stage of the crypto cycle, exchange volume can be seen as an indicator of investor interest and tends to rise and fall with market cycles.

Coinbase processed approximately $550 billion in transaction volume in Q4 2021 at the peak of the last bull market. Today, Coinbase’s volume stands at around $226 billion as the crypto market recovers but is still far from the highs of the last cycle. This shows not only that there is room for growth, but also the potential to surpass previous records should another bull market take shape; because crypto assets often break past previous highs in these cycles.

This potential market volatility has significant consequences for Coinbase. At the peak of the previous bull run, more than 90% of Coinbase’s revenue came from transaction fees. In comparison, transaction fees now account for only 47% of its revenue, reflecting Coinbase’s successful expansion into other revenue streams. This means that as volume increases, Coinbase will have more ways to monetize its platform than in previous cycles, increasing its revenue potential.

As the next crypto bull market gains momentum, Coinbase is positioned to benefit not only from rising transaction fees but also from other revenue sources such as blockchain rewards, custody fees, and other subscriptions and services that are highly correlated with crypto prices.

Although speculative, some rough “back-of-the-napkin” math suggests that Coinbase’s diversified revenue streams could produce record revenue and profits if currency volume approaches or exceeds the $550 billion peak of the last bull market. This will not only bring Coinbase back to all-time highs, but will also set it up to set new records.

So where might Coinbase be in a year? If the crypto bull market does indeed take off with increased liquidity resulting from low interest rates, Coinbase could see a significant upside. As diversification efforts pay off and exchange volume begins to increase, it wouldn’t be surprising to see Coinbase not only retest previous highs, but potentially set new ones as well.