Coinbase Achieves Profit in Q1 2024, Exceeding Market Expectations
Coinbase recently released its financial report for the first quarter of 2024.
According to the report, Coinbase’s revenue for Q1 was $1.64 billion, surpassing the average analyst expectation of $1.34 billion. The net profit was $1.18 billion, with earnings per share of $4.40. This marks a significant financial turnaround compared to the loss of $78.9 million and loss per share of $0.34 in the same period last year. This profitable performance comes after the company announced its first profit in two years in February this year.
It is worth noting that the profit for this quarter includes a $650 million gain from the valuation of the cryptocurrency assets held for investment, due to the adoption of new accounting standards.
Firstly, Trading fees surged due to market recovery
In terms of business type, the total trading fee revenue for Q1 2024 was $1.077 billion, a 103.42% increase compared to the previous quarter and a 187.35% increase compared to the same period last year. Trading fees accounted for 65.75% of the total revenue and became the main source of revenue.
The significant increase in trading fee revenue is mainly due to the substantial increase in trading volume from retail and institutional investors.
Retail trading fees
Retail trading fee revenue for Q1 2024 was $935 million, a 99.45% increase compared to the previous quarter and a 184.08% increase compared to the same period last year. The retail trading volume for Q1 2024 was $56 billion, a 93.10% increase compared to the previous quarter and a 166.67% increase compared to the same period last year. Coinbase’s CFO stated in a conference call that the substantial growth in trading fees is attributed to the growth of new users, the recovery of trading volume from existing users, and an increase in average trading volume per user.
Institutional trading fees
Institutional trading fee revenue for Q1 2024 was $85 million, a 132.70% increase compared to the previous quarter and a 282.96% increase compared to the same period last year. Institutional trading volume for Q1 2024 was $256 billion, a 104.8% increase compared to the previous quarter and a 106.45% increase compared to the same period last year.
Institutional trading fee revenue benefited from the approval of Bitcoin spot ETFs and product innovation. Since the US Securities and Exchange Commission approved a series of new US Bitcoin spot exchange-traded funds, it has attracted a large influx of institutional investors. Many of these ETFs have chosen Coinbase as their custodian partner, attracting over $50 billion in funds as of the end of the first quarter.
The institutional platform Coinbase Prime achieved record-high trading volume and active customer count in Q1 2024. Prime platform provides custody, trading, financing, and staking services to institutional clients. The approval and listing of Bitcoin ETFs in January 2024, along with the rise in Bitcoin prices in the first quarter, significantly increased customer engagement in the Prime product suite.
Benefitting from the stimulation of trading activity from ETF issuances, Coinbase Prime, as the custodian partner for exchange-traded funds, achieved record-high trading volume in Q1, with a 115% year-on-year increase to 31.2 trillion, and Q1 revenue surged from $2.23 million in the same period last year to $8.54 million, with loans reaching $797 million.
Other trading revenue
Other trading revenue for Q1 2024 was $56 million, a 137.71% increase compared to the previous quarter and a 140.77% increase compared to the same period last year. Other trading revenue benefited from the increase in revenue from the Layer 2 solution provided by Coinbase Base.
Subscriptions and services revenue growth is remarkable
Subscriptions and services revenue reached $511 million in the current quarter, a 36.09% increase compared to the previous quarter and a 41.25% increase compared to the same period last year. Subscriptions and services revenue accounted for 31.20% of the total revenue and was mainly driven by the growth of blockchain reward revenue, custody fee revenue, and other subscription service revenue.
Stablecoin revenue
Stablecoin revenue for Q1 2024 was $197 million, a 14.98% increase compared to the previous quarter and a 0.8% decrease compared to the same period last year. Stablecoin revenue benefited from the increased market value of USDC. The value of USDC on the platform was $5.5 billion, approximately twice the value at the end of Q4 2023.
It is worth noting that in the first quarter, USDC had the highest growth rate among all USD stablecoins.
Reward revenue
Blockchain reward revenue for Q1 2024 was $151 million, a 104.75% increase compared to the same period last year and a 58.68% increase compared to the previous quarter. Blockchain reward revenue mainly benefited from the significant increase in the value of cryptocurrencies, particularly a 60% increase in the price of Ethereum from December 31, 2023, to March 31, 2024.
Custody fee revenue
Custody fee revenue for Q1 2024 was $32 million, a 63.96% increase compared to the previous quarter and a 90.00% increase compared to the same period last year. Custody fee revenue benefited from the increase in cryptocurrency prices and the growth of custody business for Bitcoin spot ETFs. Among the 11 Bitcoin spot ETFs approved by the SEC in January 2024, Coinbase served as the custodian for 8 of them, and the company’s custody assets reached approximately $171 billion by the end of Q1 2024.
Interest and financing revenue
Prime financing revenue was reclassified from other subscription service revenue to interest and financing revenue for Q1 2024, with revenue of $67 million, a 36.40% increase compared to the previous quarter and a 54.04% increase compared to the same period last year.
Other subscription service revenue
Prime financing revenue was reclassified from other subscription service revenue to interest and financing revenue for Q1 2024, with revenue of $67 million, a 36.40% increase compared to the previous quarter and a 54.04% increase compared to the same period last year.
New growth areas support continued expansion in performance
In the foreseeable future, the passage of the Stablecoin Act will further contribute to Coinbase’s stablecoin revenue.
Furthermore, Base Chain, as Coinbase’s L2 solution, has performed well in the past quarter, surpassing other L2 layer chains in terms of trading activity due to the active trading of both new and old meme tokens on the Base platform.
In addition, according to Wall Street analysts’ estimates, Coinbase’s revenue from new derivative businesses in the next two years will reach hundreds of millions of dollars. In the long run, Coinbase’s expansion into the derivatives field from its main platform increases its upward potential.
Lastly, the continuous growth of Coinbase International and obtaining regulatory licenses for cryptocurrency assets in more countries will also drive the continuous expansion of its business scale.