COIN - Coinbase Returns To Profit Amid ETF Hype: Sustainable Recovery Or Short-Lived Success? | Benzinga
Coinbase Global, Inc. (NASDAQ: COIN) previously projected that the launch of the spot Bitcoin (CRYPTO: BTC) ETFs could add billions to the crypto market cap, opening new opportunities for asset-class investments.
Through its primary roles as a crypto custodian and trading associate for ETF issuers, COIN’s financials have seen a considerable uptick, proving the forecast to be accurate.
COIN posted its first quarterly profit in two years, primarily driven by increased trading activity fueled by restored investor enthusiasm for digital assets.
Investors responded ardently to the company’s return to profit, resulting in an over 13% increase in COIN's shares in pre-market trading on Feb. 16 following the release of its fourth quarter and full year 2023 financial results the prior day. Over the past year, the stock has gained about 175%.
Let’s now dive deeper into COIN’s fourth-quarter results and identify possible contributory elements.
COIN’s total revenue rose 41.5% quarter-over-quarter to $953.80 million, outpacing analysts' predictions – primarily propelled by an 83.4% quarter-over-quarter spike in transaction revenue. This surge was attributed to increased volatility and higher cryptocurrency prices following the much-awaited spot Bitcoin ETFs approval.
Moreover, the positive outlooks around improved economic conditions in 2024 led to robust 'risk-on' activity in capital markets, thereby driving the company’s transaction revenues higher.
COIN's total trading volume grew 102.6% sequentially due to impressive growth in Markets and Coinbase Prime – the former majorly involving market maker activity and the latter leading to a higher average fee rate. Anticipation of Bitcoin ETF approval enhancing market conditions and COIN’s expanding product portfolio can also explain the strength of Prime volume.
As of the fourth quarter, 33% of the world’s top 100 hedge funds by reported AUM decided to onboard with COIN. The company saw increased client onboarding and high reactivation rates among large-scale institutional clientele across its product range. COIN's custodial fee revenue rose 24.7% quarter-over-quarter to $19.70 million, driven by high crypto asset prices.
The investment community was primarily buoyed by the impressive surge in COIN's annual total subscription and services revenue, which shot up by 77.5% year-over-year. Stablecoin interest income, along with standard fiat interest income, constituted the main drivers of growth for COIN in 2023 – primarily tied to macroeconomic factors like climbing interest rates that were beyond COIN's immediate control.
COIN’s total operating expenses reduced 29.2% year-over-year to $838.18 million in the fourth quarter. This decline resulted in a robust net income of $273.44 million, or $1.04 per share, compared to the net loss of $557 million, or a loss of $2.46 per share in the year-ago quarter.
COIN Asserts Dominance in the Bitcoin ETF Custody Space
The spot Bitcoin ETF market has witnessed unprecedented expansion, seizing the runner-up position among commodity ETFs. COIN has distinguished itself as a pivotal force by offering trading, custody, and other services ...