MARKET RECAP
📈 The S&P is Back in the Green!

🤯 What a wild year it has been so far…

😰 After the market’s worst losing streak in 5 years, with the S&P falling a massive -19% from all-time highs in the span of 2 months, the markets have quickly bounced back.

📈 This year-to-date:

• The S&P 500 is up +1.5% (up +19.6% from April’s lows)

• The tech-heavy Nasdaq-100 is up +2.2% (up +25.4% from April’s lows)

• Bitcoin is up +7.6% (up +36.7% from April’s lows)

This week alone, the S&P rose +2.6% after the US and China reached an agreement to pause tariffs for 90 days, marking a rapid and dramatic pause to the trade war that has been plaguing the markets.

⭐️ This reset was much quicker and much stronger than markets expected, leading to Wall Street analysts scaling back their recession predictions, with JPMorgan's chief economist saying they’re now “below 50%.” 

😅 All this has led to a quick recovery, with the market breathing a massive sigh of relief. So much so that the Cboe Volatility Index (VIX), also known as “the fear index,” dropped 20% this week - the fastest drop ever on record.

🔥 And while a lot of stocks had a great week, there was one in particular that was flying high - Coinbase ($COIN), which jumped +28% after announcing that next week it will become the first crypto company to join the S&P 500 index.

👀 So let’s take a look at Coinbase, what the S&P news means for the company, and what analysts are saying about the high-flying stock…

TOP STORY
📈 Coinbase Soars 28% As It Joins the S&P 500

🤑 If you hold any S&P 500 ETF like ZSP, VFV, or VOO, you’ll soon own shares in Coinbase, as next week, it will be replacing Discover Financial Services ($DFS) in the S&P 500.

💰 This is a massive deal as trillions of dollars across both retail and institutional funds are benchmarked to the index, meaning the stocks that make the cut get strong liquidity, broad-based analyst coverage, and generally improved price stability.

🧐 If you’re like me, you probably know Coinbase is a popular crypto exchange, but maybe not much more than that, so since this will soon be a stock in most of our portfolios (through the S&P 500 inclusion), let’s take a look under the hood and understand what we’re owning…

📊 Coinbase’s Business Model + Recent Earnings

💰 Transaction Revenue

Coinbase unsurprisingly makes a good chunk of its money from transaction-based revenue, 62% to be exact - growing 17% year-over-year to $1.1B in Q1 2025. This is simply the fees charged when buying/selling crypto.

🪙 Coinbase’s Stablecoin Opportunity

While transactions are the bigger chunk of the overall revenue, the biggest growth driver for the company in the past year was its Stablecoin revenue, growing 51% to $298B, ~15% of total revenue. This revenue comes from its 50% revenue share agreement with Circle for funds made from the USDC stablecoin.

💡 This stablecoin revenue is a really interesting aspect of the business and a big potential growth driver. Currently in the ‘stablecoin wars,’ the front-runner is USDT, owned by Tether, but Coinbase’s revenue-share agreement with Circle on USDC aims to change that with the “goal to make USDC the number 1 stablecoin.”

💰 Stable coins are big business - with Tether reporting an ‘eye-popping’ $13B in profit last year (for context, Coinbase only earned $66M in profits this recent quarter).

📈 The more Coinbase can help increase the adoption of USDC over USDT, the more of this massive market it can capture for itself. And with USDT still having 2.5x the market share of USDC, there is still a lot of room to grow.

🎁 Blockchain Rewards

🧩 The final piece of the puzzle is what Coinbase calls ‘Blockchain rewards,’ which is primarily staking revenue. When customer stake their assets they earn rewards from the blockchain network for contributing to the network security and operations, and Coinbase takes a ~35% cut of these rewards.

Blockchain rewards account for ~10% of revenues, but also grew faster than transaction revenues, up 30% year-over-year.

🤿 Ok, now that we understand Coinbase’s core business, let’s take a look at what analysts are saying and some of the key concerns about the stock. But first, a quick word from this week’s sponsor, Harvest ETFs!

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TOP STORY CONT.
❌ Analysts Are Mixed on Coinbase As Cyberattack and SEC Investigations Raise Concerns

After the announcement of Coinbase’s inclusion in the S&P 500, a bunch of analysts (including Barclays, Oppenheimer, Benchmark Co. and Goldman Sachs) all raised their price targets (see image above), but overall analysts still remain mixed.

🎯 According to TipRanks, the average analyst price target is just $268 - only 0.6% above the current share price.

Now, analyst targets aren’t everything, but it does speak to the general uncertainty on Wall Street about the stock, with 3 big concerns swirling around the crypto giant:

🦹‍♀️ 1) Cyberattackers Recently Stole Sensitive Customer Data

This week, cyberattackers stole sensitive customer data and threatened to publish it unless Coinbase paid a $20 million ransom.

Overall, this seems like it will have short-term impact with analysts pointing out that the hack was the “result of bribes and social engineering rather than a failure of any blockchain technology” and only impacted 1% of accounts. Still, the news raised concerns and experts estimate could cost the company up to $400M.

🧑‍⚖️ 2) Coinbase Under Investigation from the SEC

Another headline putting a cloud over Coinbase was the New York Times’s report that Coinbase is under investigation by the SEC for misstating its user numbers in its IPO.

While this made headlines, most analysts seem to believe it will have limited impact. The investigation was opened during the Biden administration before the crypto-critical SEC head Gary Gensler was replaced by the vocal crypto-advocate Paul Atkins.

🚩 3) Fundamental Challenges

Beyond the headlines, there are a few other fundamental challenges analysts point out that raise red flags:

• Coinbase’s recent earnings showed a 10% decline in trading volume, leading to transaction revenue falling 19% for the quarter

• Coinbase faces fierce competition from exchanges like Binance, Kraken, Robinhood, and Gemini.

• Coinbase already trades at a lofty Price/earnings ratio of 50x - more than double the sector median, reflecting high expectations already baked into the share price.

• Coinbase earnings are strongly tied to the crypto market at large, which is still highly volatile.

🙋‍♂️ My Thoughts

Personally, despite the challenges, I’m definitely going to be adding Coinbase to my watchlist and following it more closely. I find the growth potential of Coinbase’s stablecoin revenues intriguing, and their recent $2.9B acquisition of Deribit likely a good move to diversify revenue and expand internationally.

🌼 In the Blossom community, the stock ranked as the #88 Most Sold and didn’t crack the Top 100 Most Bought, meaning holders took the jump this week as an opportunity to take profits (or were spooked by the hack / SEC news).

💬 With nearly 1,000 holders on Blossom, I’m very curious to hear you thoughts on the stock - join the discussion on my post here!

🗞️ Before we break down some of the other headlines of the week - a quick word from RYSE!

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ALSO IN THE NEWS
🗞️ Other Key Headlines this Week

🚨‘Big Short’ Investor Michael Burry Sells Everything and Shorts Nvidia

• Michael Burry’s firm, Scion Asset Management, sold all its stocks in Q1 2025, including big names like Apple and Alphabet, and took out a massive short position on Nvidia (equal to 50% of his whole portfolio), betting the stock will fall.

• Burry also shorted Chinese tech giants, including Alibaba (BABA), Baidu (BIDU), JD.com (JD), and PDD Holdings (PDD).

• Cosmetics Company Estée Lauder ($EL) remains Scion's sole long position, with the firm doubling its stake to 200,000 shares during the quarter.

• Burry is known for his 2008 subprime mortgage bet, famously depicted in "The Big Short."

• Burry has not commented on the moves, but they were disclosed in the 13F filing (required by any fund managers with over $100M in assets).

🚗 Uber Jumps 9% After Famous Investor Bill Ackman Makes it His #1 Holding

• Uber ($UBER) shares rose 9% after Bill Ackman's Pershing Square disclosed a substantial stake, making it the fund's largest single holding.

• Ackman praised Uber’s business model, highlighting its leadership in ride-hailing, food delivery, and logistics.

• Uber posted a record Q1 2025, with $9.5 billion in revenue and positive free cash flow for the fourth consecutive quarter.

• The move signals confidence in Uber’s long-term profitability as it transitions from growth to sustained cash generation.

🍁 Robinhood Likely to Launch in Canada with Acquisition of WonderFi

• Robinhood ($HOOD) announced it will acquire Canadian crypto firm WonderFi ($WNDR) for C$250 million, paying C$0.36 per share—a 41% premium over WonderFi’s last closing price.

• I’ve met the WonderFi CEO (I actually spoke on a panel with him last year), and I’m quite sure the reason for the acquisition would be WonderFi’s brokerage licence, which would enable quick entry for Robinhood into Canada (for stocks as well as crypto).

• WonderFi's last reported quarterly revenue was $9.1 million, with over 650,000 users across its platforms.

🍺 Buffett Buys Beer and Sells Banks, Doubling Stake in Alcohol Producer Constellation Brands

• Warren Buffett’s Berkshire Hathaway (BRK.B) doubled its stake in beer maker Constellation Brands ($STZ) to over $1.2 billion, making it a top-15 holding.

• Constellation, the maker of Corona and Modelo, has seen its stock rise nearly 20% in the past year, driven by strong demand and premium pricing.

• Berkshire also trimmed positions in several U.S. banks, including Bank of America ($BAC) and U.S. Bancorp ($USB), amid ongoing challenges in the sector.

• The move highlights Buffett’s preference for cash-generating businesses with strong brand power in uncertain markets.

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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