News
Coinbase Rides Bitcoin ETF Frenzy to Post First Quarterly Profit in Two Years
Coinbase Global (PIECE OF MONEY) posted its first quarterly profit in two years as trading surged on a fresh wave of optimism about digital assets, marking a potential turning point for the largest U.S. cryptocurrency exchange.
Investors welcomed the news, sending Coinbase shares up more than 13% in premarket trading Friday. The stock is down 5% year-to-date as of Thursday’s close, but has soared 180% over the past year.
Coinbase reported a profit of $273 million in the fourth quarter, well above analysts’ expectations. It was the first positive quarterly result since the fourth quarter of 2021, when the last cryptocurrency boom was still raging.
The surprising fourth-quarter performance brought its annual result to a net profit of $95 million.
Coinbase saw its profits rise thanks to several factors: it attracted more traders to its platform and more customers for its subscription and services businesses. Total transaction revenue jumped 64% to $529 million.
It also received a $121 million non-cash release that had been set aside for taxes, as well as an $18 million gain from debt buybacks.
Brian Armstrong, CEO of Coinbase. REUTERS/Brendan McDermid (REUTERS / Reuters)
What helped draw more people to the Coinbase platform was a surprise market surge triggered by speculation that the Securities and Exchange Commission might grant approval to bitcoin cash exchange-traded funds.
ETFs would allow investors to gain exposure to the world’s largest cryptocurrency without having to own it, potentially broadening the mainstream appeal of digital assets.
The SEC finally granted those approvals in early January, and Coinbase served as custodian for eight of the 11 ETFs. The company can leverage its work with ETF issuers through its custody, prime trading, and trade settlement businesses.
Bitcoin (BTC-USD) has since surpassed $52,000, its highest point since 2021. It is still far from an all-time high of $68,789 set in 2021, a year when it benefited from a period of low interest rates and fiscal stimulus that put excess savings into investors’ pockets.
The market crashed in 2022 as rates rose and crypto exchange giant FTX collapsed, before making a surprise comeback in 2023. Bitcoin is up more than 150% in the past year.
The bullish case for Coinbase and the industry as a whole in 2024 is that many of crypto’s biggest problems are now officially behind us following the criminal crisis. conviction from FTX founder Sam Bankman-Fried and a Binance CEO Changpeng Zhao enters guilty plea.
Coinbase still faces some challenges, however. It is in the midst of a legal dispute with the SEC, which sued the exchange last June for allegedly operating an unlicensed crypto exchange, broker-dealer, and clearing agency, jeopardizing its future profits.
The story continues
The company has chosen to defend itself in court, and CEO Brian Armstrong has been vocal in his disagreements with the SEC.
The company is also actively lobbying Washington for more clarity on how the crypto world is regulated.
“We remain confident that the United States will get its way, whether it’s through the creation of new case law by the courts, the passage of new legislation by Congress, or ultimately the 52 million Americans who used crypto voting in this upcoming election,” he said on a call with analysts Thursday.
“Cryptocurrencies have yet to have their iPhone moment,” Armstrong said. “We hope we can help make that happen.”
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas of finance.
Click here for the latest crypto news, updates and more related to ethereum And Bitcoin Price, Crypto ETFs and Market Implications for Cryptocurrencies
Read the latest financial and business news from Yahoo Finance