Coinbase Cites Stablecoins and Base as Key Priorities for 2024 Following Crushing Q4 Estimates
Coinbase Reports Strong Q4 Earnings, Sets Ambitious Plans for Growth
After a strong fourth-quarter earnings report that exceeded expectations, U.S.-based cryptocurrency exchange Coinbase has big plans for the future. The company’s decision to lean heavily on its work with the popular USDC stablecoin this year, leveraging its recently launched layer-2 blockchain Base as a way to experiment and improve blockchain utility, and continuing regulatory work on behalf of itself and the larger web3 industry are just a few of the initiatives that will shape Coinbase’s strategy in the coming months.
A Bull Market and Institutional Inflows Are Returning
The crypto industry has experienced a significant turnaround from its downturn in 2023. Trading activity has increased, and regulatory wins have provided a boost to the market. The recent approval of spot bitcoin ETFs has opened up new opportunities for Coinbase and its peers. As a result, many market players expected Coinbase’s trade-based revenue to rise, and it did.
Fourth-Quarter Financial Results
Coinbase generated $529.3 million worth of "transaction" or trading revenue in the fourth quarter, with $492.5 million coming from retail activity and $36.7 million from institutional traders. This figure is up 83.4% from the third quarter but still down 44% year-over-year as the market climbs back to bull market levels.
Revenue Growth
The company’s total revenue for Q4 2023 was $953.8 million, surpassing expectations of just over $820 million. Earnings came in at $1.04 per share on net income of $275.7 million, well ahead of expectations of $0.02 per share.
Tailwinds and Regulatory Wins
Coinbase is poised to surpass its strong Q4 results in the first quarter of 2024, thanks in part to regulatory wins such as the approval and launch of spot bitcoin ETFs. The company’s custody business should expand linearly with AUM inflows from these ETFs. Coinbase is also the custodian for eight of the 11 spot bitcoin ETF issuers, providing an additional source of revenue.
Potential Headwinds
While Coinbase is on strong footing, there are some potential headwinds on the horizon. The rise in interest rates has bolstered the value of USDC reserves and provided income from cash reserves. However, moderation in interest rates this year could limit growth in interest-based incomes at Coinbase.
A Positive Start to the Year
Coinbase’s decision to generate positive adjusted EBITDA even during a lengthy market downturn is a testament to its resilience. As it heads back into growth territory as a slimmed company, Coinbase provides a bit of warmth for an industry that has just emerged from an extended winter.
Conclusion
Coinbase’s strong Q4 earnings and big plans ahead are a welcome development for the crypto industry. The company’s focus on USDC stablecoin work, layer-2 blockchain Base, and regulatory efforts will undoubtedly shape its strategy in the coming months. As the market continues to climb back to bull market levels, Coinbase is poised to capitalize on new opportunities.
Topics:
- Coinbase: The U.S.-based cryptocurrency exchange
- Crypto: The cryptocurrency industry as a whole
- Earnings: Financial results and performance metrics
- Web3: A term that refers to the next generation of the web, built on blockchain technology
About the Authors:
This article was written by Jacquelyn Melinek, a senior reporter at TechCrunch covering cryptocurrency, and Alex Wilhelm, a senior reporter for TechCrunch covering the markets, venture capital, and startups.
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