The crypto market has had a strong start to the year, continuing its upward trend from 2024. One cryptocurrency stock that could be poised for significant growth is Coinbase (COIN -0.77%), which is up over 8% this year as I write this. For the past year, its returns are about five times higher than those of the S&P 500.

Coinbase is the largest U.S. crypto exchange by trading volume, and it tends to perform well during crypto's bull markets. Here's why it could deliver impressive returns in 2025 and beyond.

A crypto-friendly political climate

While it's still early, the Trump administration appears to be highly supportive of cryptocurrencies. On Jan. 23, President Donald Trump signed an executive order to promote the advancement of cryptocurrencies and explore building a stockpile of digital assets. He has also pledged to halt aggressive enforcement actions and regulatory oversight of the crypto industry.

The president's Treasury nominee, Scott Bessent, seems pro-crypto. Last summer, he told Fox Business that he's "excited about [Trump's] embrace of crypto" and that "the crypto economy is here to stay." Trump's pick for chairman of the Securities and Exchange Commission (SEC), Paul Atkins, is expected to be friendlier to the crypto industry than previous chairman Gary Gensler, who advocated for stronger regulations.

That's good news for Coinbase, which has been locked in a lawsuit with the SEC since 2023 over allegations that the company operated as an unregistered securities exchange.

If these leaders' approach remains consistent, it could mean a more relaxed regulatory climate for the next four years, which would benefit the crypto market and Coinbase. It could mean fewer legal challenges to deal with, and if cryptocurrency isn't such a hot-button issue, that could also help attract more institutional investors.

A user-friendly crypto exchange with a large coin selection

Coinbase's core business is its crypto exchange services. It supports over 240 digital assets, including Bitcoin, Solana, Dogecoin, and hundreds of smaller altcoins. Considering many crypto investors like trying to find unknown cryptos that will skyrocket, Coinbase's large roster is a big selling point.

Equally as important is that Coinbase is easy to use. Cryptocurrency is a complicated subject that can be intimidating for new investors. Coinbase has educational modules, rewards users who complete those modules with free crypto, and has a beginner-friendly trading platform.

Those benefits have helped Coinbase build its user base and trading volume. In the third quarter of 2024, it had 7.8 million monthly transacting users (MTUs), a 16% year-over-year increase. Trading volume was $185 billion, increasing by an impressive 143% year over year.

I've tried several crypto exchanges, and for my money, Coinbase is the one that provides the best user experience. It also scores highly with other users and professional review sites. While there's no consensus on the "best crypto exchange," Coinbase is widely considered one of the top options.

Diverse revenue streams improve Coinbase's financials

Coinbase has become more than just a place where users can buy and sell cryptocurrency. It also has a crypto staking program, allowing users to earn rewards on their holdings. The exchange charges a fee for this, and though it's possible to stake crypto on your own, doing it through Coinbase is faster and more convenient.

Coinbase recently launched a Bitcoin-backed USD Coin loan program through Morpho, an open-source lending protocol that charges variable interest rates. The exchange's staking program and loans are ways to generate more revenue while providing valuable financial services for its users.

Coinbase also offers custodial services and has become the custodian of choice for many of the largest crypto exchange-traded funds (ETFs). It's the custodian for nine of the first 11 Bitcoin ETFs and eight of the first nine Ethereum ETFs.

The exchange's recent financial reports reflect its growing mix of revenue streams. In the third quarter of 2024, Coinbase brought in $556 million in subscription and services revenue, a 66% year-over-year increase. That's nearly as much as the $572.5 million it made in total transaction revenue (a 98% year-over-year increase). Its additional sources of revenue make Coinbase more resilient because it's not completely reliant on crypto trading fees.

Be ready for a roller-coaster ride

Coinbase is highly volatile. From its initial public offering (IPO) in 2021 through the end of 2022, its share price plummeted by nearly 90%. Over the next two years, it increased by over 600%. Bottom line: It's not a stock for the faint of heart.

That's true with just about any type of cryptocurrency investment. The crypto market has skyrocketed in value at times, but it has also fallen just as quickly, and there's no guarantee that any cryptocurrencies will see widespread adoption. Investing in cryptocurrency and crypto stocks carries considerable risk.

An investment in Coinbase is effectively an investment in the future of the crypto market without needing to tie your success to any specific cryptocurrencies. It will have ups and downs, but if cryptocurrency continues to grow, Coinbase will grow along with it.