1708080140 Coinbase defies the Bitcoin ETF frenzy to post its first

Coinbase defies the Bitcoin ETF frenzy to post its first quarterly profit in two years

Coinbase Global (COIN) posted its first quarterly profit in two years as trading surged on a new 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 on Friday. As of Thursday's close, the stock is down 5% so far in 2024 but is up 180% in the last year.

Coinbase posted a fourth-quarter profit of $273 million, well above analysts' expectations. It was the first positive quarterly result since the fourth quarter of 2021, when the last crypto boom was still raging.

The surprise performance in the fourth quarter boosted full-year earnings to a net income of $95 million.

One of the reasons Coinbase was in the black: The company attracted more traders to its platform and more customers to its subscription and services business. Total transaction revenue increased 64% to $529 million.

It also benefited from a $121 million non-cash release that had been set aside for taxes, as well as an $18 million gain on debt repurchases.

Coinbase CEO Brian Armstrong looks on at the Piper Sandler Global Exchange and FinTech Conference in New York City, U.S., June 7, 2023. REUTERS/Brendan McDermidCoinbase CEO Brian Armstrong looks on at the Piper Sandler Global Exchange and FinTech Conference in New York City, U.S., June 7, 2023. REUTERS/Brendan McDermid

Brian Armstrong, CEO of Coinbase. Portal/Brendan McDermid (Portal / Portal)

What helped attract more people to Coinbase's platform was a surprise market rally sparked by speculation that the Securities and Exchange Commission might grant approval for spot Bitcoin exchange-traded funds.

The ETFs would allow investors to gain exposure to the world's largest cryptocurrency without having to own it, potentially increasing the appeal of digital assets to the mainstream.

The SEC finally granted these approvals in early January and Coinbase acted as custodian for eight of the eleven ETFs. The company can benefit from working with ETF issuers through its custody, prime trading and trade execution businesses.

Since then, Bitcoin (BTC-USD) has risen to over $52,000, its highest level since 2021. It is still a long way from an all-time high of $68,789 in 2021, a year in which the company is going through a phase Low interest rates and fiscal stimulus benefited from excess savings in investors' pockets.

The story goes on

The market crashed in 2022 as interest rates rose and giant crypto exchange FTX collapsed, before making a surprise comeback in 2023. Bitcoin rose more than 150% last year.

The bullshit for Coinbase and the larger industry in 2024 is that many of crypto's biggest problems are now officially in the rearview mirror following the criminal conviction of FTX founder Sam Bankman-Fried and an admission of guilt by Binance CEO Changpeng Zhao.

However, Coinbase still faces some challenges. It is in the middle of a legal battle with the SEC, which sued the exchange last June for allegedly operating an unlicensed crypto securities exchange, broker and clearinghouse, jeopardizing its future earnings.

The company decides to defend itself in court, and its CEO Brian Armstrong has been vocal about his disagreements with the SEC.

The company is also actively lobbying Washington for greater clarity on how the world of cryptocurrencies is regulated.

“We remain confident that the US will get this right, whether through the creation of new jurisprudence through the courts, through the passage of new laws through Congress, or ultimately through the 52 million Americans who have used cryptocurrency voting in this upcoming election.” he said during a call with analysts Thursday.

“Crypto has yet to have its iPhone moment,” Armstrong said. “We hope we can help make this happen.”

David Hollerith is a senior reporter at Yahoo Finance, covering banking, crypto and other financial areas.

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