Coinbase Global (COIN) posted its first quarterly profit in two years as a new wave of optimism around digital assets sent trading surging, marking a potential turning point for the largest U.S. cryptocurrency exchange.
Investors welcomed the news, sending Coinbase stock up more than 13% in pre-market trading on Friday. As of Thursday's close, the stock was down 5% through 2024, but up 180% from last year.
Coinbase posted a profit of $273 million in the fourth quarter, well above analyst expectations. This is the first positive quarterly result since the fourth quarter of 2021, when the previous cryptocurrency boom was still raging.
The company's impressive fourth quarter results resulted in full-year net income of $95 million.
Coinbase's rapid rise to profitability is due to more traders flocking to its platform and more customers flocking to its subscription and services business. Total trading revenue increased 64% to $529 million.
It also benefited from the release of $121 million in non-cash that had been set aside for taxes and an $18 million gain from debt repurchases.
What drove more people to Coinbase's platform was an unexpected market rally sparked by speculation that the Securities and Exchange Commission might grant approval for a spot Bitcoin exchange-traded fund.
ETFs allow investors to gain exposure to the world's largest cryptocurrency without owning it, potentially widening the digital asset's mainstream appeal.
The SEC ultimately granted these approvals in early January, and Coinbase served as custodian for eight of the 11 ETFs. The company can benefit from working with ETF issuers through its custody business, prime trading business, and trade settlement business.
Bitcoin (BTC-USD) has since risen above $52,000, its highest since 2021. It's still a long way from the all-time high of $68,789 reached in 2021, which benefited from low interest rates and fiscal stimulus. Excess savings in investors' pockets.
The market crashed in 2022 due to rising interest rates and the collapse of giant cryptocurrency exchange FTX, but it made a surprising comeback in 2023. Bitcoin rose more than 150% last year.
The bullish picture for Coinbase and the larger industry in 2024 comes after FTX founder Sam Bankman Freed's conviction and Binance CEO Changpeng Chao's guilty plea, many of crypto's biggest issues is now officially in the rearview mirror.
However, Coinbase still has some challenges. The company is in the midst of a legal battle with the SEC, which last June accused the exchange of operating an unlicensed cryptocurrency exchange, broker, and clearing house, jeopardizing its future profits.
The company has chosen to defend itself in court, and CEO Brian Armstrong has been vocal about his disagreements with the SEC.
The company is also actively lobbying Washington for more clarity on how the crypto world is regulated.
“Whether it comes from courts passing new case law, Congress passing new laws, or ultimately from the 52 million Americans who used cryptocurrency voting in the upcoming election. We are confident that the United States will resolve this issue correctly,” he said by phone. Analysts on Thursday.
“Crypto still needs an iPhone moment,” Armstrong said. “We hope we can help make that happen.”
David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrencies, and other financial areas.
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