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Turning the Tide: Coinbase Reports First Profit in Two Years

Turning the Tide: Coinbase Reports First Profit in Two Years

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Crypto exchange Coinbase’s earnings report for Q4 of 2023 revealed that the company made a profit for the first time in two years. 

Coinbase’s 2023 Q4 Earnings Report

Coinbase Global has achieved a significant milestone, recording a quarterly profit for the first time in two years. The company's success is attributed to the surge in crypto prices and higher interest income earned on its stablecoin. In the fourth quarter of 2023, Coinbase reported a net income of $273 million and total revenue of $3.1 billion, equivalent to $1.04 per share.

After facing losses of $557 million in the previous year, Coinbase's net profitability for all of 2023 stands at $95 million, marking a substantial turnaround for the cryptocurrency exchange.

Market Response and Performance

Market response to Coinbase's profitability was positive, with shares closing up 3.3% on Thursday and rising approximately 13% after hours. The surge in crypto prices in the fourth quarter contributed to higher trading volume, a significant revenue driver for Coinbase.

During the earnings call, CEO Brian Armstrong reiterated the importance of cryptocurrency in shaping the future of society. He emphasized Coinbase's commitment to building in a compliant manner, contrasting it with competitors who adopted aggressive strategies at the expense of regulatory compliance.

Impact of Bitcoin ETFs

The recent approval of Bitcoin ETFs and the ensuing market volatility had a notable impact on Coinbase's transaction revenue. Despite concerns that ETFs could cannibalize Coinbase's business, executives expressed confidence in the company's ability to navigate regulatory challenges and support crypto innovation in the U.S.

Coinbase CFO Alesia Haas addressed the increasing gains and volatility, saying, 

“The increase in volatility had a meaningful impact on our transaction revenue. We saw strong growth and reengagement from both simple and advanced traders. Notable average trading volumes materially increased among our advanced traders.”

Coinbase's transaction revenue is primarily derived from bitcoin, ether, and other crypto assets. Interestingly, revenue from other crypto assets surpassed that from bitcoin, reflecting the diversity of Coinbase's revenue streams.

Regulatory Advocacy

Coinbase is actively advocating for clearer crypto regulations in the U.S. The company is pushing for legislation in Congress, has invested in a pro-crypto super PAC, and backs initiatives like the Stand with Crypto Alliance. CEO Armstrong believes the U.S. will eventually establish a conducive regulatory environment for crypto, driven by legal precedents, legislative actions, and active participation from crypto users.

He said, 

“We remain confident that the U.S. will get this right, whether it comes from the courts creating new case law, Congress passing new legislation, or ultimately the 52 million Americans who’ve used crypto voting in this upcoming election."

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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