Coinbase first-quarter profit rises above $1 billion amid ETF frenzy

Coinbase Global (COIN) posted its second consecutive quarterly profit as crypto trading surged in the first three months of 2024.

Nevertheless, shares of the largest US cryptocurrency exchange fell nearly 4% in pre-market trading on Friday.

The stock is up more than 31% since the start of the year, but remains 38% below its peak in November 2021.

Net income rose to $1.17 billion, the highest mark in nine quarters, while net income rose 115%.

This is the second time Coinbase has posted positive quarterly revenue since the fourth quarter of 2021, the last time the crypto boom was even higher.

The boost for the first quarter of the year came from a resurgence in digital currency trading due to a series of new Bitcoin ETFs launched in January.

These ETFs attracted a lot of new money, broadening the digital asset’s mainstream appeal by allowing investors to gain exposure to bitcoin without directly owning it.

Global crypto trading volume for major currencies has reached its highest level since 2021, up 68% from a year ago, according to data provider CoinMarketCap.

The surge boosted Coinbase’s transaction revenue to $1.07 billion in the first quarter of 2023, nearly three times what it earned in trading fees and better than analysts’ consensus expectations.

Bitcoin (BTC-USD) also rose in value in the first quarter, reaching a new all-time high of $73,750. It has since traded from that peak to $59,000.

This is up 34% year to date.

Coinbase reported non-trading subscriptions and services revenue of $511 million, up 41% from a year ago.

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This included $32.3 million in excess custodial fees. That number was 90% higher than a year ago for the partnership of eight bitcoin ETFs that launched in January.

Major exchanges have benefited from having less competition than during the last boom.

Another major exchange, FTX, filed for bankruptcy and its co-founder Sam Bankman-Fried received a criminal conviction last year. This year he was sentenced to 25 years in prison.

Another Coinbase competitor, Binance, paid $4.3 billion in fines to US government agencies for violating anti-money laundering requirements.

Brian Armstrong, CEO and co-founder of Coinbase, speaks at the 2022 Milken Institute Global Conference on May 2, 2022 in Beverly Hills, California, USA.  REUTERS/David Swanson

Brian Armstrong, CEO of Coinbase, 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 involvement in the breach.

But those blows to competition haven’t helped Coinbase gain as many users as analysts had hoped. Its monthly transaction users (MTUs) were 8 million in the first quarter, a 5% decline from the same period last year. The company also suggested that second-quarter earnings from trade fees may not be as good. The trading platform’s transaction revenue through April exceeded $300 million.

And Coinbase has its own regulatory issues. The company faces a 2023 lawsuit from the SEC alleging violations of US federal securities laws.

Coinbase and its CEO Brian Armstrong are fighting those allegations. Important cases can take years to emerge.

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

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