Coinbase's first-quarter profits rose to more than $1 billion due to the ETF craze

Coinbase Global (COIN) reported its second straight quarterly profit as cryptocurrency trading surged through the first three months of 2024.

However, shares of the largest U.S. cryptocurrency exchange fell nearly 4% in pre-market trading on Friday.

The stock is up more than 31% since the beginning of the year but is 38% below its peak in November 2021.

Net income rose to $1.17 billion, the highest level in nine quarters, while net revenue rose 115% compared to the same period last year.

This was only the second time Coinbase reported positive quarterly earnings since Q4 2021, when the recent cryptocurrency boom was still raging.

The increase in the first quarter of this year came from a rebound in cryptocurrency trading due in large part to the launch of a series of new bitcoin ETFs in January.

These ETFs have attracted a lot of new money, which could expand the mainstream appeal of digital assets by allowing investors to get exposure to bitcoin without directly owning it.

Global cryptocurrency trading volume for major currencies has reached its highest level since 2021, up 68% from last year, according to data provider CoinMarketCap.

The rise took Coinbase's transaction revenue to $1.07 billion, nearly three times what it earned in trading fees in the first quarter of 2023 and better than consensus forecasts from analysts.

Bitcoin (BTC-USD) also rose in value during the first quarter, rising to a new all-time high of $73,750. It has since fallen from that peak to trade at around $59,000.

It is still up 34% year to date.

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Coinbase reported $511 million in subscriptions and non-commercial services, up 41% from last year.

This included higher custody fees of $32.3 million. This number was 90% higher than last year, thanks in part to partnerships with eight Bitcoin ETFs launched in January.

The major exchange has benefited from the fact that it has less competition than during the last boom.

Another large exchange, FTX, filed for bankruptcy, and its co-founder Sam Bankman-Fried was criminally convicted last year. He was sentenced this year to 25 years in prison.

Binance, another Coinbase competitor, also paid $4.3 billion in fines to US government agencies for violating anti-money laundering requirements.

Brian Armstrong, CEO and co-founder of Coinbase, speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, US, May 2, 2022. REUTERS/David Swanson

Brian Armstrong, CEO of Coinbase, in 2022. (David Swanson/REUTERS) (Reuters/Reuters)

Earlier this week, Binance founder and CEO Changpeng Zhao was sentenced to four months in prison for his role in the violations.

But those hits to the competition didn't help Coinbase gain as many numbers as analysts had hoped. The number of monthly transaction users (MTUs) for the first quarter was 8 million, a decrease of 5% from the same period last year. The company also suggested that second-quarter revenue from trading fees may not be so good. The trading platform's transaction revenue as of April was more than $300 million.

Coinbase has its own regulatory issues. The company faces a 2023 lawsuit from the Securities and Exchange Commission alleging that the company violated U.S. federal securities laws.

Coinbase and its CEO Brian Armstrong are fighting the allegations. A critical case could take years to resolve.

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David Hollerith is a senior reporter at Yahoo Finance covering banking, cryptocurrency, and other areas of finance.

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