The 2024 U.S. Presidential election has seen a surge of activity from the crypto industry, with various groups and lobbyists backing candidates who they believe will best represent their interests. So far this year, crypto companies have collectively invested approximately $119 million in political contributions, primarily channeling these funds into crypto-focused super PACs. And that’s just up until June 30.
This level of spending has positioned the crypto industry as the largest corporate political donor in 2024, making up 48% of all corporate donations. In fact, political contributions from crypto firms have skyrocketed by over 3000% this year, making them a dominant force in the election.
According to Public Citizen, no industry “has so wholeheartedly embraced raising as much directly from corporations and openly using that political war chest as a looming threat (or reward) to discipline lawmakers toward adopting an industry’s preferred policies.”
Leading the charge is Coinbase Global, Inc. (COIN), America’s largest registered crypto exchange, which has funneled more than $50 million into key races and pro-crypto political action committees (PACs) this election cycle. However, the overall decline in the crypto market has taken a toll on COIN’s performance, with the exchange seeing a 28% drop in average daily trading volumes compared to the previous quarter. This decline is partly due to decreased user engagement and trading activity on the platform.
COIN’s market share fell from 44.6% in the first quarter to 41.2% in the second quarter due to heightened competition from platforms like Robinhood Markets, Inc. (HOOD), which led to users migrating elsewhere. The recent bearish trend in the crypto market is primarily attributed to Vice President Kamala Harris's surge in the polls, which suggests she has a strong chance of winning the presidency.
Critics fear her policies might be even less favorable to the sector than the Biden administration’s. This worry is compounded by the fact that Harris has been relatively quiet on the issue, unlike her opponent, Donald Trump, who has been a vocal supporter of the crypto industry.
The crypto market’s reaction seems heavily influenced by these shifting political dynamics, especially after President Joe Biden’s decision to step back, which has caused unease among crypto investors. Many fear that without Trump’s support for more lenient crypto regulations, Harris might implement stricter measures that could stifle the market’s growth. However, it’s possible that these risks are now being overestimated in the market.
Despite these concerns, the long-term fundamentals of the crypto industry appear strong. Institutional adoption is rising with the introduction of Bitcoin and Ethereum ETFs, and cryptocurrencies are gaining broader acceptance as legitimate investment options. Let’s look at the fundamentals of COIN in more detail.
COIN's total revenue for the second quarter (ended June 30, 2024) amounted to $1.45 billion, up 104.8% year-over-year, while its subscription and services revenue increased 17% sequentially to $599 million. The exchange managed to stay profitable even in a challenging crypto market with a modest net income of $36.15 million, compared to a loss of $97.41 million in the prior year’s quarter.
Previously, Coinbase relied heavily on transaction fees, which fell by 27% due to lower trading volumes. However, its focus on expanding subscription-based revenue through products like blockchain rewards and custodial services has bolstered its income stream. Additionally, the company has delivered positive adjusted EBITDA for six consecutive quarters despite various crypto market conditions.
Coinbase has evolved into an all-weather company with increasingly diversified revenue streams, making it more stable and less dependent on the volatile nature of cryptocurrency markets. This diversification not only helps mitigate the impact of market volatility but also provides resilience if any specific part of the business faces challenges.
Bottom Line
While there’s been a lot of concern about what a Harris presidency might mean for the cryptocurrency market, I believe these fears are overblown. Both the U.S. stock market and crypto have shown resilience under various administrations, and the global nature of crypto makes it unlikely that any one leader could derail its progress.
Additionally, Congress appears to be moving in a more supportive direction for crypto, with bipartisan efforts to establish favorable legal frameworks. For instance, Senate Majority Leader Chuck Schumer has expressed optimism about passing crypto-related legislation by the end of the year. This continued legislative push should provide a more stable environment for the crypto industry.
Considering COIN’s ability to adapt to political shifts and the growing investor confidence in crypto, we believe holding on to this stock could be a wise choice. As the crypto market matures, Coinbase is expected to thrive regardless of who occupies the White House, making it a solid long-term investment.
