Bitcoin ETFs ‘spark’ Coinbase profits as COIN rallies by +10%

• Coinbase Global Inc. announced profit for the first time in two years
• COIN shares surged as revenue hiked by 51%

Coinbase delivered a striking performance in Q4 of 2023, reporting a net income of $273 million. Last year, the total revenue was $3.1 billion, with net income contributing $95 million. 

The company has surpassed expectations with an adjusted EBITDA nearing $1 billion, according to the shareholder letter dated 15 February 2024. This financial upturn has propelled Coinbase’s stock to surge over $189 in after-hours trading too. 

Coinbase’s strategic wins

Coinbase’s remarkable success can be attributed to several key factors, as outlined by CFO Alesia Haas. During an interview with CNBC TV, she explained,

“Crypto is a volatile space, and when we see increases in volatility, it has long attracted more trading volume to our platform, and that’s exactly what we saw in the late fourth quarter sparked by the Bitcoin ETFs sparked by a belief that the macroeconomic environment would improve in 2024.”

Coinbase, being the custodian of 90% of total Bitcoin exchange-traded fund (ETF) crypto-assets, has benefited significantly from the massive $4 billion net inflows. The exchange’s revenue has been further bolstered by higher interest income on USDC, thanks to its partnership with Circle and the Federal Reserve’s rate hikes.

Regulatory landscape

Endorsing Haas’ views, ARK Invest CEO and CIO Cathie Wood also pointed to Coinbase’s excellent execution in the volatile market. Speaking to Yahoo Finance, Wood highlighted the company’s regulatory compliance,

“From a regulatory point of view, it is the most compliant exchange out there, and it’s losing all its competition last year’s demise of FTX, and even Binance’s issues have had a positive impact on Coinbase from a market share point of view.”

Meanwhile, the SEC v Coinbase case is still in progress. Both parties are currently awaiting a decision regarding Coinbase’s Motion to Dismiss (MTD). Notably, legal experts have been leaning towards Coinbase’s position. For example – Elliot Z. Stein, Senior Litigation Analyst at Bloomberg Intelligence, believes Coinbase has a 70% chance of winning.

Wood is also optimistic about Coinbase’s odds, pointing to victories in cases like Ripple and Grayscale. 

COIN surge and future outlook

Profits have propelled the shares of the exchange higher. COIN recorded an over 14% increase in after-hours trading on 15 February. At the close of the market, the stock was priced at $165.67, marking an increase of $5.29 or 3.30%. Moreover, both Coinbase and Bitcoin are up more than 20% month-to-date.

Interestingly, on 14 February, ARK sold off 214,068 COIN. However, Wood emphasized that it was merely an instance of trimming positions to realize profits without further implications.

The world’s second-largest cryptocurrency exchange plans to focus significantly on USDC stablecoin this year. It aims to leverage its layer-2 blockchain, Base, to explore and enhance blockchain utility. Additionally, the exchange is committed to continuing its regulatory efforts for both itself and the broader Web3 industry.