Coinbase Achieves First Quarterly Profit in Two Years Amid Bitcoin ETF Surge

Coinbase Global (COIN) celebrates a significant milestone, posting its first quarterly profit in two years, driven by a surge in trading activity amidst renewed optimism in digital assets. This achievement signals a potential turning point for the largest US cryptocurrency exchange.

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Investor enthusiasm was palpable, reflected in a more than 13% premarket surge in Coinbase's stock on Friday. While the stock experienced a 5% decline in 2024 as of Thursday's close, it has witnessed a remarkable 180% surge over the past year.

During the fourth quarter, Coinbase reported profits of $273 million, surpassing analyst forecasts. This marks its first positive quarterly earnings since the fourth quarter of 2021, during the peak of the last crypto boom.

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The unexpected fourth-quarter performance propelled its full-year net profit to $95 million. Coinbase's return to profitability can be attributed to several factors, including increased trader activity on its platform and a growing client base for its subscription and services segment. Total transaction revenue surged by 64% to reach $529 million.

Additionally, Coinbase benefited from a $121 million non-cash release reserved for taxes, along with an $18 million gain from debt repurchases.

A key driver behind the surge in Coinbase's user base was the market rally sparked by speculation surrounding the potential approval of spot bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). These ETFs offer investors exposure to bitcoin without requiring direct ownership, potentially broadening the appeal of digital assets to mainstream investors.

In early January, the SEC granted approvals for these ETFs, with Coinbase serving as custodian for eight out of the 11 approved ETFs. This collaboration positions Coinbase to benefit from its involvement with ETF issuers through its custody, prime trading, and trade settlement services.

Bitcoin (BTC-USD) has experienced a resurgence, surpassing $52,000, its highest level since 2021. Despite this rally, it remains below its all-time high of $68,789, achieved in 2021 amidst favorable interest rates and fiscal stimulus.

Looking ahead, Coinbase and the broader crypto industry face both opportunities and challenges in 2024. Despite significant progress, Coinbase is embroiled in a legal battle with the SEC, which sued the exchange last June for allegedly operating an unlicensed crypto securities exchange and broker. CEO Brian Armstrong remains steadfast in defending the company's position and advocating for regulatory clarity in Washington.

As Armstrong noted during a call with analysts, "Crypto still needs to have its iPhone moment," underscoring the ongoing efforts to drive mainstream adoption and regulatory clarity in the crypto space.

Also Read: Bitcoin Market Cap Surpasses $1 Trillion Amid Crypto Rally