Shares of Coinbase Global (COIN.O) experienced a notable surge of 12% in early trading on Friday, buoyed by robust trading volumes fueled by optimism surrounding the introduction of spot bitcoin exchange-traded funds (ETFs). This positive momentum led the cryptocurrency exchange to report its first profit since 2021. The stock price reached $186.06, poised to achieve its highest level this year and potentially increase the company’s market capitalisation by nearly $5 billion.
Coinbase Stock Rallies After Returning to Profitability on Bitcoin ETFs
The latter half of 2023 saw a surge in investor interest in major cryptocurrency tokens, spurred by expectations of the U.S. Securities and Exchange Commission’s (SEC) approval of spot bitcoin ETFs. This anticipation contributed to a 57% increase in bitcoin’s price in the fourth quarter, which enhanced Coinbase’s trading fee revenue.
Despite concerns that the ETFs might undercut Coinbase’s fee structure, the company has alleviated fears by showing resilience. Analysts at Canaccord Genuity have expressed that, although the bitcoin ETFs may divert some trading volumes from Coinbase, their presence in the market boosts overall spot prices and trading volumes, benefiting Coinbase’s operations.
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Even after the ETFs’ approval last month, Coinbase has already amassed transaction revenues of $320 million in the first quarter up to February 13, surpassing 60% of the total revenue anticipated by analysts for the full quarter.
Nonetheless, some analysts remain wary of the future. “While Coinbase continues to affirm that it hasn’t faced fee compression so far, we are sceptical of their ability to sustain their high fee rates over the medium to long term amidst escalating competition,” commented Michael Elliott, an equity research analyst at CFRA Research.
For the fourth quarter, Coinbase reported a profit of $1.04 per share, a significant improvement from the loss of $2.46 per share reported in the same period a year earlier.
