After a tumultuous 2022 that rattled the industry to its core, the cryptocurrency market is surging back. Its overall market cap of $2.7 trillion is slowly approaching its previous high-water mark of about $3 trillion.

Amid the monster rise, Coinbase (COIN 3.28%) has bounced back like a phoenix from the ashes. The top cryptocurrency stock soared 391% in 2023. And so far this year, it’s up more than 50%.

Coinbase bulls are yelling louder than ever. And I’m sure they have their sights set on a bigger number over the long term.

Can this skyrocketing stock go from its current valuation of $64 billion to becoming a $1 trillion market cap company by 2050? Here’s what needs to happen for this lofty scenario to become a reality.

Betting on the industry’s growth

Coinbase is one of the biggest global crypto brokerage and exchange operators. It generates fees anytime individual and institutional accounts trade in various digital assets on the platform. Plus, management has focused more recently on boosting subscriptions and services, like staking, custody, and stablecoin activities. In 2023, Coinbase handled $468 billion of crypto trading volume. And it had 7 million monthly active users in the fourth quarter.

There are other ways this company is influencing the crypto market. Coinbase has about $343 million of strategic investments in privately held crypto enterprises. This gives it a financial incentive for the market to succeed.

Perhaps more importantly, founder and Chief Executive Officer Brian Armstrong emphasizes the fact that Coinbase is regulatory-forward. This means it leans into legislation related to the crypto industry, helping drive discussions to provide regulatory clarity. Coinbase has always aimed to work within the regulatory framework.

Based on all these factors, investors can view owning Coinbase shares as a bet on the growth of the overall cryptocurrency industry.

The path to $1 trillion

For the company to have a chance at rising 16-fold between now and 2050 to get to a $1 trillion market cap, it’s a certainty that the crypto market will also need to significantly increase in value. If crypto asset prices rise 10-fold by 2050, there’s a reasonable explanation for how Coinbase could grow at a faster clip.

In this bullish scenario for the industry, Coinbase could attract more users and handle much greater trading volume over time. The business can then continue to monetize all of the assets on its platform via transaction fees, subscriptions, and services. It’s possible that Coinbase could introduce new features that we can’t even imagine right now.

Consequently, the business could increase its revenue at a more accelerated pace compared to the rise in value of the total industry. Add in operating efficiencies, and Coinbase’s net income should increase even faster. And with the potential for lots of free cash flow, management might start repurchasing shares, which would boost earnings per share (EPS). There you have it.

This all depends not only on the crypto market soaring, but for Coinbase to remain at the top of the food chain. There is a clear path to the $1 trillion mark. However, there’s a lot of uncertainty about this outcome becoming a reality.

Coinbase is, without a doubt, going to continue dealing with regulatory issues, as is the case with any novel technology. Any changes to the law could have a major impact on the company’s long-term success.

If the crypto market does skyrocket in value, there’s no question that Coinbase would be faced with intensifying competition. Who knows? The “Magnificent Seven” businesses could all shift their strategies to be crypto-forward if the industry truly takes off. Coinbase’s path would be more difficult.

And lastly, maybe crypto just doesn’t find the level of adoption that many industry supporters hope it will. A lot of things need to go right for digital assets to become a bigger part of our daily lives.

So, while reaching a $1 trillion valuation by 2050 could happen, it’s very far from being a sure thing. Investors hoping for this outcome should temper expectations.