Coinbase's first-quarter report exceeded expectations, with ETF driving institutional trading volume to a record high

Thanks to the rebound in Bitcoin prices and the listing of spot ETFs, the largest cryptocurrency exchange in the United States doubled its performance in the first quarter, with net profit turning from loss to profit, far exceeding expectations.

After the US stock market closed on Thursday, May 2nd, Coinbase released its first quarter financial report for the fiscal year 2024. The financial report shows that the company achieved revenue of $1.64 billion in the first quarter, exceeding the expected $1.34 billion, a year-on-year increase of 113%. With the support of $737 million in unrealized gains from holding cryptocurrency assets, Coinbase achieved a net profit of $1.18 billion in the first quarter, marking a second consecutive profitable quarter, a turnaround from a loss of $78.9 million in the same period last year.

Following the release of the financial report, Coinbase's stock price rose by 2.25% after hours. The company's stock price has accumulated a growth of over 45% since the beginning of this year.

Trading revenue doubles, custody revenue doubles

In terms of revenue types, as the main source of revenue, Coinbase's consumer trading revenue for this quarter was $935 million, an increase of over 100% compared to the same period last year, with total trading revenue almost doubling to $1.08 billion compared to the same period last year.

Secondly, subscription and service revenue reached $511 million this quarter. Among them, custody revenue in the first quarter rose to $32.3 million, nearly doubling from the same period last year. It is reported that Coinbase provides Bitcoin custody services for 8 out of 11 Bitcoin ETF issuers.

Other income, including company interest, recorded $49.89 million in the first quarter, a 38% year-on-year increase.

Bitcoin ETF drives surge in trading volume and service demand

At the beginning of this year, the U.S. Securities and Exchange Commission (SEC) approved the first-ever Bitcoin spot ETF, and since then, 11 ETFs that have been approved for listing have attracted a large influx of institutional investors, raising over $50 billion.

Benefiting from the stimulation of ETF issuance on trading activities, as a custodial partner for exchange-traded funds, Coinbase Prime achieved a record high trading volume in the first quarter, increasing by 115% year-on-year to 312 billion times, with first-quarter revenue also surging from $22.3 million in the same period last year to $85.4 million, while loans surged to $797 million during the same period Bitcoin prices have soared, hitting a historical high of $73,000 per coin in March this year, further boosting the revenue of Coinbase Prime.

The company stated in its financial report:

"Generally, the trading volume on our platform is mainly influenced by the price of cryptocurrencies, the market capitalization of cryptocurrencies, the volatility of cryptocurrencies, macroeconomic conditions, and our share in the total trading volume of cryptocurrencies in the spot market. During periods of high cryptocurrency prices and volatility, the trading volume on our platform also increases accordingly."

Financial data shows that in the first quarter, two indicators closely related to cryptocurrency trading volume recorded growth: cryptocurrency volatility increased by 12%, and the total market capitalization of cryptocurrencies increased by 94%.

Moreover, due to the growth in trading volume exceeding the growth in the total trading volume of the cryptocurrency market, Coinbase's market share has increased — in the concentrated U.S. market, the company's trading volume grew by 78% in the first quarter.

However, as the trading frenzy gradually cools down, whether Coinbase's platform trading volume can sustain its high levels remains a mystery.

Analysts at Raymond James stated in a report this week:

"With the slowing pace of fund inflows, Bitcoin prices have peaked and have been slightly declining since mid-March,"

"In fact, the trading volume on the Coinbase platform has been significantly lower than the levels seen in early March."