Coinbase COIN shares surged 24% on May 13, 2025, — marking their biggest one-day gain since the day after Donald Trump’s election victory — following the announcement that the cryptocurrency exchange will be added to the S&P 500 Index, as quoted on CNBC. S&P Global stated late on May 12 that Coinbase would replace Discover Financial Services, which is being acquired by Capital One Financial.

Coinbase-Heavy ETFs in Focus

Coinbase has solid exposure to exchange-traded funds (ETFs), such asFirst Trust SkyBridge Crypto Industry & Digital Economy ETF CRPT, Global X Blockchain ETF BKCH, Fidelity CryptoIndustry and Digital Payments ETF FDIG and Roundhill COIN WeeklyPay ETF COIW.

Each of these ETFs invests more than 10% of its portfolio in COIN shares. No wonder, CRPT jumped 7.4% on May 13, BKCH gained by 6.8%, FDIG added 6.7% and COIW shot up 30%.

S&P 500 Inclusion Drives Buying Interest

Companies added to the S&P 500 often experience a rise in their stock prices due to passive funds and ETFs that must purchase shares to track the benchmark index. To qualify for inclusion in the S&P 500, a company must be profitable both in its latest quarter and cumulatively over the previous four quarters.

Coinbase met those requirements with net income of $65.6 million in its latest earnings report, though down from $1.18 billion a year ago due to adjustments related to crypto valuations. Revenues rose 24% year over year to $2.03 billion.

Election Momentum on Coinbase

Coinbase has been closely aligned with the return of Donald Trump to the White House. The stock soared 31% on Nov. 6, the day after the election, thanks to expectations that the new administration would take a more favorable stance toward cryptocurrency following four regulatory-heavy years under President Joe Biden.

However, Coinbase shares’ journey has been rough this year, with share drops of 26% in February and 20% in March, largely due to market uncertainty from Trump’s tariff announcements. Including Tuesday’s rally, the stock is now off by 0.1% so far this year.

Hopes for Deregulation and Industry Optimism

The beginning of Trump’s new term has generally been positive for the crypto industry, with early steps including deregulation and an executive order to create a strategic Bitcoin reserve. However, legislation has yet to gain traction due to controversy surrounding Trump’s personal crypto dealings, including a meme coin project tied to his family.

Note that the broader crypto market is also booming. Bitcoin surged past $100,000 last week. This momentum has further lifted sentiment around Coinbase and other crypto-linked assets (read: Bitcoin Tops $102K for First Time Since January: ETFs in Focus).

Story Continues

Strategic Expansion: $2.9B Acquisition of Deribit

Coinbase also hit headlines last week with the announcement of a $2.9 billion acquisition of Deribit, a major crypto derivatives exchange based in Dubai. The deal — the largest in the crypto industry to date — is expected to help Coinbase expand its global presence and diversify revenue streams outside the United States.

What Lies Ahead for COIN?

Analysts have cut their earnings estimates over the past seven days for COIN shares by a solid magnitude. This is not a good signal for the stock. Three out of six analysts slashed earnings estimate for the June quarter, over the past seven days while three out of four analysts cut the estimate for the current year.Zacks Investment Research

Image Source: Zacks Investment Research

Is COIN Stock Overvalued?

COIN shares have been trading at a P/E (trailing 12 months) of 29.52X, much higher than negative 8.75X, which the stock’s underlying Financial - Miscellaneous Services industry is trading at. Price/Cash Flow (most recent fiscal year) ratio of COIN is 23.84X compared with 10.77X for the underlying industry in which it trades at. This points to overvaluation concerns associated with the COIN stock.

Bottom Line

While Coinbase is riding on several growth factors, the company’s fundamentals and valuation are at risk. Investors can thus tap the stock via the ETF route in order to minimize the company-specific concentration risks.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Global X Blockchain ETF (BKCH): ETF Research Reports

Coinbase Global, Inc. (COIN):Free Stock Analysis Report

First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT): ETF Research Reports

Fidelity Crypto Industry and Digital Payments ETF (FDIG): ETF Research Reports

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

View Comments