Coinbase Reports First Quarterly Profit Since 2021, Boosted by Surging Bitcoin Trading Volumes
Coinbase Global, one of the largest cryptocurrency exchanges in the world, has announced its first quarterly profit since 2021. The company recorded strong trading volumes driven by the renewed interest in bitcoin, resulting in a nearly 13% surge in its shares after the market closed.
The approval of the first spot bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC) has reignited investor interest in cryptocurrency. Despite being approved just in January, the anticipation of a positive judgment by the SEC propelled bitcoin's price up by 57% in the final quarter of 2023.
Coinbase benefitted immensely from this bullish trend, as its transaction revenue for the fourth quarter soared by 64% to $529.3 million. Michael Elliott, an equity research analyst with CFRA Research, described the company's results as "exceptional" and exceeding both expectations and Street consensus.
Looking ahead, Coinbase is predicting a solid first quarter for its subscription and services unit, which includes revenues other than trading. The company expects this unit's revenue to range between $410 million and $480 million, following a 33% increase in the fourth quarter to $375.4 million.
Stablecoin revenue was a major contributor to this growth, with the interest Coinbase earns through its collaboration with fintech startup Circle driving the bulk of the increase. Circle manages the USD Coin (USDC) stablecoin in partnership with Coinbase, and the interest on USDC reserves has become a significant source of revenue for the cryptocurrency exchange.
Overall, Coinbase reported a profit of $273.4 million, or $1.04 per share, in the fourth quarter, a stark contrast to the loss of $557 million, or $2.46 per share, during the same period the year before.
While the introduction of spot ETFs has raised concerns of investors seeking crypto exposure outside of the Coinbase platform, the company dismissed these fears. Alesia Haas, the CFO of Coinbase, stated that ETFs have been "net positive for the industry and additive to Coinbase."
As the crypto market continues to evolve, Coinbase remains optimistic about its future prospects and its ability to generate sustained growth and profitability.
Analyst comment
Positive news. The market is expected to continue to grow as investor interest in cryptocurrency is reignited by the approval of spot bitcoin exchange-traded funds (ETFs). Coinbase Global’s strong quarterly profit and increased revenue from its subscription and services unit indicate a solid performance in the first quarter. However, there are long-term concerns about potential investor migration from Coinbase due to the availability of ETFs.
