Coinbase Global announced a significant quarterly profit for the first time since 2021, fueled by a strong resurgence in cryptocurrency interest. This positive development propelled the company’s shares to soar by nearly 13% in after-hours trading. The revival in crypto enthusiasm has been largely attributed to the U.S. Securities and Exchange Commission’s (SEC) recent approval of the first spot bitcoin exchange-traded funds (ETFs), a move that has rekindled investor interest.
Surging Trading Volumes and Revenue
The anticipation of the SEC’s favorable stance on bitcoin ETFs contributed to a 57% increase in bitcoin’s price in the final quarter of 2023. This surge in price significantly impacted Coinbase’s transaction revenue, which soared by 64% to $529.3 million during the fourth quarter. Michael Elliott, an equity research analyst with CFRA Research, highlighted the quarter’s results as exceeding both expectations and consensus, describing them as exceptional.
Growth in Subscription and Services
Coinbase is not only focusing on trading but is also seeing promising growth in its subscription and services unit. This segment, which encompasses businesses beyond trading, is expected to generate between $410 million and $480 million in revenue in the first quarter, surpassing the LSEG estimate of $356.22 million. The fourth quarter saw a nearly 33% increase in revenue from this unit, reaching $375.4 million, with a significant boost from stablecoin revenue. This revenue stream stems from Coinbase’s partnership with fintech firm Circle, which issues the USD Coin (USDC) stablecoin. The interest earned on reserves backing USDC has become a major income source for Coinbase, benefiting from the Federal Reserve’s interest rate hikes.
Profitability and Future Outlook
For the quarter ending December 31, Coinbase reported a profit of $273.4 million, or $1.04 per share, a stark turnaround from a loss of $557 million, or $2.46 per share, in the previous year. This performance far surpassed analysts’ expectations, which had anticipated a loss of 1 cent per share.
Despite concerns that the introduction of spot ETFs might lead investors away from the Coinbase platform, the company remains optimistic. CFO Alesia Haas emphasized that ETFs have been a net positive for the industry and have contributed to Coinbase’s growth.
