Throughout the "crypto winter," leading US crypto exchange Coinbase (ticker: COIN) consistently reported losses. The renewed interest in the fourth quarter of 2023 pushed the broker and custodian into the black for the first time in two years.
On April 14, 2021, US crypto exchange Coinbase made history. The service completed the largest crypto IPO to date, listing directly on the Nasdaq at a valuation of over $100 billion. The IPO was considered a milestone and the first significant recognition of the sector by Wall Street. However, over the course of two tough years for the crypto markets, the exchange suffered significant revenue setbacks. It wasn't until the fourth quarter of 2023 that Coinbase returned to profitability.
How does Coinbase make money?
Unlike many other crypto-only exchanges, Coinbase has multiple revenue streams. About half of its total revenue comes from fees charged for crypto trading on the platform. As in previous quarters, retail traders accounted for the lion's share ($492.5 out of $529.3 million). However, income from interest on the USDC stablecoin ($171.6 million), staking rewards ($95.1 million) and other services also contributed to Coinbase's quarterly revenue of $953 million.
Annual turnover of the crypto broker Coinbase by quarter / Source: Letter to stakeholders Q4 2023
For the past two years, the achieved revenue of a few 100 million was not enough to generate a net profit. However, in addition to higher revenues, the crypto exchange was able to cut expenses, including staff layoffs. Overall, Coinbase posted a profit of $273.4 million, or $1.04 per share, in the fourth quarter of 2024, compared to a loss of $557 million, or $2.46 per share, the year before.
2024: Another Year of Growth?
Wall Street analysts largely expected another quarterly loss for the crypto exchange. The positive result, even before the approval of Bitcoin ETFs, came as a surprise. In the coming year, Coinbase aims to build on the revenue drivers of the past quarter. Specifically, the company expects to see more revenue from trading fees and USDC holdings. But custody for some of the Bitcoin ETFs as well as its own Layer-2 network Base could also contribute to a year of growth.
JP Morgan analysts raised their COIN price target shortly before the quarterly results, just a few weeks after a downgrade. The share price reacted positively and is trading +13.2% in the pre-market.
Coinbase COIN/USD (weekly) / Chart: Tradingview