Coinbase reported better-than-expected revenue in its Q1 earnings report on Thursday. Coinbase stock was trading about 2% lower in extended trading. The Coinbase Global swung to a Q1 profit of over $1 billion from a year earlier loss, helped by an uptick in cryptocurrency trading following the launch of the first U.S.-listed ETFs tracking bitcoin in January.
The Coinbase stock tends to benefit from big gains in bitcoin as large rallies in the cryptocurrency lead to increased trading volumes and demand for other services.
Coinbase earnings report
Here’s how the company did, compared to analysts’ consensus from LSEG.
Coinbase Earnings: $4.40 per share. That may not be comparable to the $1.09 average analyst estimate.
Coinbase Revenue: $1.64 billion vs. $1.34 billion expected
It is the primary marketplace in the U.S. for buying and selling digital tokens, reported net income of $1.18 billion, or $4.40 per share, compared to a year-ago loss of $78.9 million, or 34 cents a share. In February, the company reported its first profit in two years.
Crypto prices rocketed after the U.S. Securities and Exchange Commission approved the launch of a spate of exchange-traded funds (ETFs) tied to the spot price of bitcoin in January after a decade-long tussle with the industry.
Spot bitcoin ETFs,
Coinbase is the custodian for several of the spot bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust.
Enthusiasm about the ETFs sent bitcoin to a new record high above $72,000 in March and renewed investor enthusiasm in digital assets. Trading volumes at the Coinbase in the first quarter came in at $312 billion, compared with $145 billion a year earlier.
“Keeping our cost structure low while continuing to innovate is really paying off,” said CEO Brian Armstrong on a call with analysts.
In recent weeks, however, bitcoin has struggled as investors have recalibrated interest rate expectations.
Tightened monetary policy
The U.S. Federal Reserve kept its benchmark rate elevated on Wednesday after tightening monetary policy at an unprecedented pace. It signaled it is still leaning toward eventual reductions in borrowing costs, but highlighted recent disappointing inflation readings that could put rate cuts further off.
Higher rates have allowed Coinbase to boost its interest income. Coinbase earns interest on reserves from USD Coin (USDC), a stablecoin it governs jointly with cryptocurrency firm Circle. USDC, a crypto token designed to have a relatively stable price, is backed by dollar and equivalent assets held in banks and other financial institutions.
It posted interest and finance fee income of $66.7 million in the first quarter, compared to $43.3 million the year prior.
Coinbase stock update
Coinbase stock fell 2.5% in after-hours trading, after ending the trading session up nearly 9%.
The shares of Coinbase climbed almost 9% on Thursday ahead of the report and have jumped roughly 32% year to date after soaring almost fivefold in 2023.
“Despite a very solid report, the stock traded lower after hours with concerns that trading volumes will decrease based on downward movement in bitcoin,” said Paul Marino, chief revenue officer at investment firm GraniteShares.
