Coinbase, the largest cryptocurrency exchange in the United States, reported a remarkable revenue of $1.6 billion in the first quarter of the year, marking a substantial 72% increase compared to the previous quarter. This impressive performance was driven by a surge in transactions resulting from the overall uptrend in the cryptocurrency market and a favorable change in accounting rules related to cryptocurrencies. Consumer transaction revenue doubled to $935.2 million, with volume soaring by over 93% to $56 billion, while institutional trading revenue surged by 133% to $85.4 million, with volume more than doubling to $256 billion. Bitcoin played a prominent role in both consumer and institutional transactions, accounting for one-third of the activity.
Coinbase’s shares experienced a slight decline in after-hours trading following the announcement of their impressive quarterly results, despite initially rising nearly 9% to approximately $229 earlier in the day. A year ago, the shares were trading at just $51. During the first quarter of the previous year, Coinbase reported losses of $78.9 million (or 34 cents per share); however, in the latest quarter, the company reported a net income of $1.18 billion ($4.40 per share) and an EBITDA of $1 billion, surpassing the total for the entire previous year. The exceptional revenue figures were partly boosted by a one-time $737 million paper gain due to new accounting rules that allow crypto firms to record price increases in their balance sheets.
In a letter to shareholders accompanying the quarterly report, Coinbase highlighted their progress towards their 2024 priorities of driving revenue, utility, and regulatory clarity. The company emphasized its increased market share in U.S. spot and derivatives markets, achieving all-time highs on Coinbase Prime and witnessing a significant increase in USDC market capitalization. Coinbase’s Ethereum layer-2 chain, Base, generated $56.1 million in revenue during the first quarter, outperforming Ethereum in terms of transaction volume. Developer activity on the network increased by 800%, and Coinbase acquired a minority stake in Circle, the issuer of stablecoin USDC, which experienced a 30% growth in market capitalization in Q1. As a result, Coinbase’s subscriptions and services revenue increased by one-third, including a 15% boost in stablecoin revenue.
While Coinbase has diversified its revenue streams with platforms like Base and USDC, the recent gains were primarily driven by favorable market conditions. For example, during the quarter, the price of Bitcoin rose by 57% and reached an all-time high of $73,000 thanks to over $50 billion flowing into 10 spot exchange-traded funds approved by the SEC on January 11. However, Coinbase’s transaction expenses also grew significantly, increasing by 73% to $217 million. Looking ahead to Q2, the company estimates its overall expenses to be as high as $890 million, primarily driven by the elevated costs associated with higher trading volumes, including customer support and infrastructure expenses. Despite these challenges, Coinbase remains optimistic about its future growth and prospects, as it continues to innovate and expand its presence in the cryptocurrency market.
