Coinbase first-quarter profits surged above $1 billion on ETF frenzy

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

Yet the stock of the largest US cryptocurrency exchange fell by as much as 4% in after-hours trading Thursday.

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

Net income rose to $1.17 billion, the highest mark in nine quarters, while net revenue rose by 115% when compared to the year-ago period.

This was just the second time Coinbase has reported positive quarterly earnings since the fourth quarter of 2021, when the last crypto boom was still raging.

The boost in this year’s first quarter came from a revival in digital coin trading due largely to the launch of a series of new bitcoin ETFs in January.

These ETFs attracted a lot of new money, potentially widening the mainstream appeal of digital assets by allowing investors to get exposure to bitcoin without directly owning it.

Global crypto trading volume for major coins reached its highest level since 2021, increasing 68% from to a year ago, according to data provider Coinmarket cap.

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

The value of bitcoin (BTC-USD) also surged during the first quarter, climbing to a new all-time high of $73,750. It has since fallen from that peak to trade around $59,000.

It remains 34% higher year to date.

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

This included higher custody fees of $32.3 million. That number was 90% higher compared with a year ago thanks in part to partnerships with 8 of the bitcoin ETFs launched in January.

The major exchange has benefited from the fact that it has less competition than it did during the last boom.

Another big exchange, FTX, filed for bankruptcy and its co-founder Sam Bankman-Fried was criminally convicted last year. He was sentenced this year to 25 years in prison.

Binance, another Coinbase rival, also paid $4.3 billion fines to US government agencies for violating anti-money laundering requirements.

Earlier this week, Binance founder and CEO Changpeng Zhao was sentenced to 4 months in prison for his part in the violations.

But those blows to competition haven’t helped Coinbase gain as many users as analysts had hoped. Its monthly transaction users (MTUs) for the first quarter were 8 million, a 5% decline from the same period last year.

Story continues

And Coinbase has its own regulatory troubles. The firm is facing a 2023 lawsuit from the SEC alleging the company violated US federal securities laws.

Coinbase and its CEO Brian Armstrong are fighting those allegations. The critical case could take years to play out.

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

Click here for the latest crypto news, updates, and more related to ethereum and bitcoin prices, crypto ETFs, and market implications for cryptocurrencies

Read the latest financial and business news from Yahoo Finance