Coinbase Global (COIN.O) shares surged close to a two-year high on Friday following the crypto exchange’s announcement of its first quarterly profit since 2021.
The rise in shares was propelled by a surge in trading volume in anticipation of the approval of spot bitcoin exchange traded funds (ETFs).
The stock soared by 14% to $189.28, boosting the company’s market value by over $5 billion.
Trading fees for Coinbase saw improvement, driven by increased investor interest in popular cryptocurrencies like bitcoin, particularly since the latter half of 2023 in anticipation of spot bitcoin ETF approvals.
The company addressed concerns about ETFs potentially cannibalizing its fees, with analysts cautioning that users might opt for low-cost ETFs over directly holding assets.
Analysts at Canaccord Genuity noted, “While we believe that the bitcoin ETFs could take some trading volumes away from Coinbase, their injection into the market, driving higher overall spot prices and trading volumes provide momentum to Coinbase’s business.”
Despite the recent approval of ETFs, Coinbase generated transaction revenue of $320 million in the first quarter, surpassing analysts’ expectations by over 60% for the entire three-month period.
However, JPMorgan analysts warned of a potential loss of trading volume for Coinbase.
The brokerage expressed a desire for more detailed insights into the economic arrangements with ETF issuers, stating, “Considering Coinbase’s direct participation and monetization efforts, we were hoping management would have provided more robust insight into the economics of the arrangements with issuers.”
Coinbase serves as the custodian partner for eight of the 11 approved ETFs.
Following the Thursday announcement after the bell, the exchange reported a profit of $1.04 per share for the fourth quarter, a notable improvement from the $2.46 loss reported a year earlier.