Coinbase prioritizes stablecoins and Base in 2024 after surpassing Q4 forecasts.

After reporting better-than-expected fourth-quarter profitability, U.S.-based Coinbase has huge aspirations. The second-largest crypto exchange told investors that it will rely heavily on its work with the popular USDC stablecoin this year, use its recently launched layer-2 blockchain Base to experiment with and improve blockchain utility, and continue its regulatory work for itself and the web3 industry. Meanwhile, a bull market and institutional inflows return.

Coinbase's solid fourth-quarter performance follow the crypto industry's recovery from 2023. Last year ended with increased trading activity, and 2024 began with a crucial regulatory success for spot bitcoin ETFs that might boost Coinbase and its partners.

Over the past week, crypto market value rose 14% to $1.96 trillion, the biggest level since April 2022 before the Terra LUNA catastrophe. Many market players expected Coinbase's trade-based income to climb with the crypto industry's development, and it did.

Coinbase earned $529.3 million in "transaction," or trading, revenue in the fourth quarter, with $492.5 million from retail and $36.7 million from institutional traders. It rose 83.4% from $288.6 million in the third quarter. Despite a positive outlook, the exchange's overall trading income is down 44% year-over-year as the market recovers.

Coinbase earned $953.8 million in Q4 2023, up from $629.1 million in 2022. It also easily surpassed last year's third-quarter sales of $674.1 million. Expectations were $820 million in sales, but the business exceeded it. Earnings of $1.04 per share on $275.7 million in net income exceeded forecasts of $0.02.

Coinbase may beat its impressive Q4 performance in the first quarter of 2024, which included regulatory wins and the debut of several spot bitcoin ETFs that rely on the company to store their digital assets. Coinbase's custodial business should grow linearly with AUM inflows.

But Coinbase also manages eight of the 11 spot bitcoin ETF issuers, so it's getting funds from that. As the spot bitcoin ETF market increases, Coinbase has more chances to gain. (The business calls the SEC's spot bitcoin ETF clearance “a watershed moment for the expansion of the cryptoeconomy.”)

The business reported “approximately $320 million” in transaction revenue through February 13th, putting it on track for a $640 million to $650 million quarter. Coinbase may reach $1 billion in quarterly revenue for the first time in many quarters with subscription and services revenue expected “within a range of $410-480 million” for the current quarter.

More demand for its custody services, rising trading fees, and recovering crypto prices have put Coinbase in a healthier position than a year ago. However, the corporation may face difficulties. Coinbase, like many fintech companies, has profited from rising interest rates, which have increased USDC reserves and cash reserve revenue. Interest-based income at Coinbase may slow this year as domestic interest rates fall. Some users may buy ETF products instead of bitcoin directly from Coinbase, which might affect its trading earnings.

Coinbase aimed to create positive adjusted EBITDA over a long market slump. That allowed it to return to growth as a smaller firm. That's a good way to start the year and warms an industry that endured a long winter.

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