Coinbase Global (COIN) has reported its first quarterly profit in two years, a promising sign for the largest US cryptocurrency exchange. The news was well-received by investors, with Coinbase’s stock rising more than 12% in after-hours trading. Despite a 5% decline in 2024, the stock has seen a 180% increase over the past year.
In the fourth quarter, Coinbase earned $273 million in profits, surpassing analyst expectations. This marks the first positive quarterly result since the fourth quarter of 2021, during the last cryptocurrency boom. The company’s full-year net profit came in at $95 million.
The surge in profitability can be attributed to an increase in traders and clients on Coinbase’s platform, as well as growth in its subscription and services business. Total transaction revenue saw a 64% jump to $529 million. Additionally, the company benefited from a non-cash release of $121 million for taxes and an $18 million gain from debt repurchase.
Coinbase’s CEO, Brian Armstrong, has been a vocal advocate for the crypto industry and the company’s success can be linked to the recent market rally driven by speculation of the Securities and Exchange Commission (SEC) approving spot bitcoin exchange-traded funds (ETFs). The approval of these ETFs in early January, with Coinbase serving as custodian for eight of the 11 approved, has widened the appeal of digital assets to mainstream investors.
Since the ETF approvals, Bitcoin (BTC-USD) has surged above $52,000, its highest point since 2021. While still far from its all-time high of $68,789, set in 2021, the cryptocurrency has seen a significant increase in value, driven by low interest rates and fiscal stimulus in 2021.
However, 2022 saw a market crash as interest rates rose and the FTX crypto exchange collapsed. But in 2023, Bitcoin made a surprise comeback and rose over 150%. Looking ahead to 2024, many believe that the industry’s biggest problems, such as the criminal conviction of FTX founder Sam Bankman-Fried and a guilty plea from Binance CEO Changpeng Zhao, are now in the past.
Despite this optimistic outlook, Coinbase still faces challenges. The company is currently in a legal battle with the SEC, which sued the exchange in June 2022 for allegedly operating an unlicensed crypto securities exchange, broker, and clearing agency. This legal battle could put the company’s future earnings at risk. Additionally, Coinbase is actively lobbying for clearer regulations in the crypto industry.
CEO Brian Armstrong remains confident that the US will get it right when it comes to regulating cryptocurrencies. He believes that whether it’s through the courts, legislation, or the 52 million Americans who have used crypto, the industry will see positive developments.
Armstrong also stated that “crypto still needs to have its iPhone moment” and hopes that Coinbase can play a role in making that happen.
In other news, David Hollerith, a senior reporter for Yahoo Finance, covers banking, crypto, and other financial areas. For the latest updates and news on ethereum and bitcoin prices, crypto ETFs, and market implications for cryptocurrencies, click here. Additionally, stay informed on the latest financial and business news from Yahoo Finance.
