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Coinbase’s first-quarter profits soared above $1 billion amid the ETF frenzy
Global Coinbase (CURRENCY) reported its second consecutive quarterly profit thanks to a surge in cryptocurrency trading during the first three months of 2024.
However, shares of the largest U.S. cryptocurrency exchange fell nearly 4% in pre-market trading on Friday.
The stock is up more than 31% year to date, but is 38% below its November 2021 peak.
Net income rose to $1.17 billion, the highest level in nine quarters, while net revenue increased 115% from the same period a year earlier.
This was only the second time Coinbase has reported positive quarterly earnings since the fourth quarter of 2021, when the latest cryptocurrency boom was still raging.
The boost in the first quarter of this year came from a resurgence in digital coin trading due largely to the launch of a slew of new bitcoin ETFs in January.
These ETFs have attracted a lot of new money, potentially broadening the appeal of digital assets by allowing investors to gain exposure to bitcoin without owning it directly.
Global cryptocurrency trading volume for major coins has reached its highest level since 2021, rising 68% from a year ago, according to data provider CoinMarketCap.
This surge brought Coinbase’s trading revenue to $1.07 billion, nearly three times what it earned in trading fees in the first quarter of 2023 and better than analysts’ consensus expectations.
The value of bitcoin (BTC-USD) surged during the first quarter, reaching a new all-time high of $73,750. He has since fallen from that peak to $59,000.
That remains 34% more than the beginning of the year.
Coinbase reported subscription and non-commercial services revenue of $511 million, up 41% from a year ago.
This included higher custodian fees of $32.3 million. That number is up 90% from a year ago thanks in part to partnerships with eight of the bitcoin ETFs launched in January.
The main exchange has benefited from having less competition than during the last boom.
Another large exchange, FTX, filed for bankruptcy and its co-founder Sam Bankman-Fried was criminally convicted last year. This year he was sentenced to 25 years in prison.
Binance, another Coinbase rival, also paid $4.3 billion in fines to US government agencies for violating anti-money laundering requirements.
Coinbase CEO Brian Armstrong in 2022. (David Swanson/REUTERS) (REUTERS / Reuters)
Earlier this week, Binance founder and CEO Changpeng Zhao was sentenced to four months in prison for his role in the breaches.
But these blows to the competition have not helped Coinbase acquire as many users as analysts had hoped. Its monthly transaction users (MTU) for the first quarter were 8 million, a 5% decline from the same period last year. The company also suggested that second-quarter revenue from trading fees may not be so good. The trading platform’s transaction revenue through April was more than $300 million.
The story continues
And Coinbase has its own regulatory problems. The company is facing a 2023 lawsuit from the SEC that alleges the company violated U.S. federal securities laws.
Coinbase and its CEO Brian Armstrong are fighting these accusations. The critical case could take years to resolve.
David Hollerith is a senior reporter at Yahoo Finance covering banking, cryptocurrencies and other areas of finance.
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