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Coinbase's Surge Continues

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  • Coinbase returns to profitability
  • Crypto assets rally propels Coinbase share price higher

Coinbase revenue jumped as crypto assets soared

Coinbase – the leading U.S. crypto currency exchange, announced on the 15 th of February its first profit since 2021. The robust result was supported by strong trading volumes due to a renewed interest in crypto assets. In the fourth quarter of 2023 the company reported a profit of $273.4 million, or $1.04 per share, in a stark contrast to the loss of $557 million, or $2.46 per share recorded the prior year.

This turnaround could be attributed to a surge in trading volume driven by investors’ optimism surrounding spot Bitcoin exchange-traded funds (ETFs), which lifted Bitcoin and other token prices significantly higher. Following the release of the Q4 2023 earnings results Coinbase share price experienced an impressive increase of 69%, reflecting the positive perception from investors.

During the last quarter of 2023, Coinbase have reported a rise in trading activity and investor flow. The latest Coinbase results point to strong earnings growth, which is in line with the recent rally across most crypto assets.

Market catalysts

Crypto prices have been rising for much of 2023, but the rally ramped up momentum in the last quarter of 2023 as high hopes for bitcoin ETFs sparked strong interest in digital assets. The main catalysts driving crypto prices higher have been: the approval of spot Bitcoin ETFs, the upcoming Bitcoin halving in mid-April, the imminent update of Ethereum known as Dencun, and the prospects of approval for spot ETFs on Ethereum in the United States, which is estimated to have a 50% chance of approval in May.

Enthusiasm for crypto has spiked over the past six months as investors anticipated approval of the first spot Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC). The Bitcoin ETFs were approved in mid-January; however, the expectations of a favourable decision by the SEC triggered more than 70% rally in Bitcoin prices in the last three months of 2023. This resulted in a strong rise in Q4 transaction revenue for Coinbase.

Q1 2024 guidance

The crypto exchange expects a strong first quarter, estimating its subscription and services revenue to be between $410 million and $480 million. The company’s focus in 2024 is on improving its adjusted EBITDA in absolute dollars term.

At the moment there is lack of clarity from Coinbase regarding the exact financial impact of BitcoinETFs. While the spot Bitcoin ETFs are beneficial for Coinbase the lack of transparency makes unclear the real earnings potential.

The ETFs are certainly beneficial for Coinbase as the crypto exchange provides custodial services to 8 out of the 10 spot bitcoin ETFs. While custody is a relatively small part of the business the ETFs are rejuvenating the whole crypto space, positively impacting Coinbase trading volumes.

A graph with lines and a line in orange and blue

Description automatically generated with medium confidence

Source: TradingView

Technical analysis

Coinbase share price has bottomed in January 2023 at $31.55 and has rallied to $279.71 on Monday, posting 800% increase in fifteen months. The bottom in Coinbase shares matches closely the bottom of Bitcoin, which have risen 330% over the same period of time. The chart above makes it quite clear that the surge in Bitcoin significantly affects Coinbase share price.

Bitcoin has rallied 60% from the beginning of 2024 lifting the value of other coins. This increases transaction volumes for Coinbase, which generates large portion of its revenue from transaction fees. The improved crypto market conditions and the product suite expansion has been a tail wind for Coinbase shares. Therefore, for as long as crypto prices continue to rise, we can reasonably expect Coinbase share price to move in tandem.

While at this juncture in time Coinbase shares are overbought on a short-term basis, the overall primary up trend remains constructive, and we envisage higher price levels in the year ahead. The Relative Strength Index (RSI) indicator remains firmly in the bull market range and see levels in the range between $350 – $370 as easily achievable.

Conclusion

Despite regulatory challenges, Coinbase experienced a remarkable resurgence, buoyed by surge in crypto prices and SEC-approved spot Bitcoin ETFs. Although the road ahead for Coinbase remains uncertain, as long as the momentum in crypto assets continues, Coinbase share price is likely to be supported.

Professional investors looking for magnified exposure to Coinbase may consider Leverage Shares +3x Long Coinbase or Leverage Shares -3x Short Coinbase ETPs.

Footnotes:
  1. Coinbase Investor Relations
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Sandeep Rao

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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

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Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

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Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

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Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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