On Thursday, Coinbase Global (COIN.O) reported its first quarterly profit since 2021, boosted by robust trading volumes driven by renewed interest in cryptocurrency.
Following the U.S. Securities and Exchange Commission’s (SEC) approval of the first spot bitcoin exchange-traded funds (ETFs), investor enthusiasm for crypto surged.
Even though the ETFs received approval only in January, anticipation of a positive decision by the SEC propelled bitcoin’s price up by 57% in the last three months of 2023.
This significant increase contributed to a 64% surge in transaction revenue for the crypto exchange Coinbase, reaching $529.3 million in the fourth quarter. As a result, Coinbase’s shares rose nearly 13% after the market closed.
“Results this quarter were exceptional as they far exceeded both our expectations and Street consensus,” Michael Elliott, equity research analyst with CFRA Research stated.
The cryptocurrency exchange is anticipating a robust first quarter for its subscription and services unit, encompassing businesses beyond trading. It projects revenue for the unit to range from $410 million to $480 million, surpassing LSEG’s estimate of $356.22 million.
In the fourth quarter, revenue from the unit surged by almost 33% to $375.4 million, with stablecoin revenue contributing significantly. This revenue is generated through Coinbase’s collaboration with fintech firm Circle, which issues the USD Coin (USDC) stablecoin jointly governed by both companies.
The interest earned on reserves backing USDC serves as a key income source for Coinbase, particularly benefiting from the Federal Reserve’s interest rate hikes.
Overall, the company posted a profit of $273.4 million, or $1.04 per share, for the three months ending on Dec. 31, compared to a loss of $557 million, or $2.46 per share, in the same period the previous year. Analysts, as per LSEG data, had anticipated a loss of 1 cent per share.
While some expressed longer-term concerns, such as Elliott mentioning potential shifts in investor behavior due to spot ETFs, the company dismissed these worries.
