Coinbase Global (COIN) has announced its first quarterly profit in two years, marking a significant milestone for the largest US cryptocurrency exchange. The news comes amidst a surge in trading activity driven by renewed optimism surrounding digital assets, particularly Bitcoin.
Investors reacted positively to the announcement, with Coinbase’s stock soaring more than 13% in premarket trading. While the stock had experienced some volatility earlier in 2024, it has witnessed an impressive 180% surge over the past year.
In the fourth quarter, Coinbase reported profits of $273 million, surpassing analyst expectations and representing a notable turnaround from previous quarters. This strong performance also contributed to a full-year net profit of $95 million.
Several factors contributed to Coinbase’s return to profitability. Increased trading activity on its platform, as well as growth in its subscription and services business, played a significant role. Total transaction revenue surged by 64% to reach $529 million during the quarter.
Additionally, Coinbase benefited from a non-cash release of $121 million that had been set aside for taxes, along with an $18 million gain from debt repurchasing.
One key driver behind the surge in trading activity on Coinbase’s platform was the anticipation surrounding the potential approval of spot Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). These ETFs, once approved, would provide investors with exposure to Bitcoin without the need to directly own the cryptocurrency, thereby potentially expanding the mainstream appeal of digital assets.
In early January, the SEC granted approvals for several Bitcoin ETFs, with Coinbase serving as custodian for eight of the 11 approved ETFs. This collaboration positions Coinbase to benefit from increased ETF activity through its custody, prime trading, and trade settlement services.
The resurgence in Bitcoin prices, which climbed above $52,000, further bolstered Coinbase’s performance. While Bitcoin has yet to reach its all-time high of $68,789 set in 2021, its resurgence in 2023, alongside positive market sentiment, has contributed to Coinbase’s bullish outlook.
However, Coinbase still faces challenges, including ongoing legal battles with the SEC. The exchange was sued by the SEC last June for allegedly operating an unlicensed crypto securities exchange, broker, and clearing agency, posing potential risks to its future earnings.
Despite these challenges, Coinbase remains optimistic about the future of the cryptocurrency industry. CEO Brian Armstrong has emphasized the need for regulatory clarity and continues to advocate for the industry’s growth and development.
As Coinbase navigates its path forward, its recent profitability milestone signals a potential turning point for the cryptocurrency exchange, with continued optimism surrounding digital assets and the broader crypto market.
