Gemini’s Crypto Custody Hits $30B as Analyst Predicts Coinbase Stock to Drop to $100

The Winklevoss twins’ Gemini exchange now hosts $30 billion worth of cryptocurrencies as competition among the top U.S. exchanges heats up.

In a May 11 announcement, the exchange attributed much of this year’s growth to strong demand from institutional clients: “With the incredible growth of crypto markets and institutional investor participation this year, we have more than tripled the cryptocurrencies under custody since the beginning of 2021.”

Gemini has partnered with major asset managers including BlockFi, Blockchange, CoinList, CI Global Asset Management, DAiM, BTG Pactual, Caruso, Eaglebrook Advisors, and WealthSimple.

The New York-based company was founded by Cameron and Tyler Winklevoss in 2014. Ahead of competitor Coinbase’s direct listing on Nasdaq on April 14, the pair told Bloomberg that they were also “considering” taking Gemini public.

If Gemini or another large exchange were to go public, it could significantly impact Coinbase’s share price, which has fallen from $328.28 on its first day of trading to $288.46 currently.

Is Coinbase Overvalued?

Veteran Wall Street analyst and New Constructs CEO David Trainer said in a note to clients on Tuesday that he expects Coinbase's stock price to fall to $100 or even lower due to increased competition. Trainer suggested that Coinbase is currently overvalued, noting that its current valuation implies that it will exceed the combined annual revenue of Intercontinental Exchange and Nasdaq.

“Investors should expect the stock to continue to underperform, as the share price will likely decline to $100 or lower as it becomes clear that the company is unlikely to meet the future profit expectations generated by the share price.”

Coinbase is expected to report first-quarter earnings of $3.07 per share and revenue of $1.82 billion on Thursday. Even if it beats expectations, that will only attract more competitors and depress future revenue, Trainer said.

“Coinbase may not be able to sustain future blowout gains as competition enters the market,” he said.

In April, Trainer warned that Coinbase’s proposed $100B valuation was too high due to increasing competition from Gemini, Bitstamp, Kraken, and Binance.

Data released in March indicated that Coinbase Custody had over $90B in assets under custody by the end of 2020.