Coinbase Global, a leading cryptocurrency exchange, experienced a significant turnaround in its fortunes due to a surge in crypto trading in the first quarter. However, the company cautioned about increased expenses in the second quarter as it grapples with the influx.
After the market closed on Thursday, Coinbase’s shares (COIN) fell by 2.6%. The company reported a net income of $1.18 billion, or $4.40 per share, for the first quarter, a stark contrast to the loss of $78.9 million, or 34 cents per share, in the same quarter the previous year. The per-share profit reported was significantly higher than FactSet’s forecast of $1.15 per share.
Coinbase’s Revenue Growth and Future Projections
The company’s revenue, which primarily comes from transaction fees, subscriptions, and other services, more than doubled to $1.64 billion, surpassing Wall Street’s forecast of $1.36 billion. In April, Coinbase generated over $300 million in total transaction revenue and projected that subscription and service sales would range between $525 million and $600 million for the second quarter.
However, as consumer trading volumes soared by 93% from the previous quarter, Coinbase indicated that it would need to increase spending to maintain its trading infrastructure. The company expects technology development and general administrative expenses for the second quarter to be between $660 million and $710 million, primarily driven by increased costs associated with higher trading volumes, notably customer support and certain infrastructure expenses.
According to a note from BofA analysts last month citing CoinGecko data, trading volumes on Coinbase surged during the quarter following the Securities and Exchange Commission’s approval of exchange-traded funds tracking Bitcoin (BTCUSD), the world’s largest cryptocurrency, in January. These funds enable more mainstream or cautious investors to benefit from Bitcoin’s gains without the security risks associated with owning the volatile cryptocurrency directly.
Over the past 12 months, Coinbase’s shares have skyrocketed by more than 370%. However, concerns about the Federal Reserve’s decision on whether to cut interest rates have recently put pressure on the digital currency’s price.
Coinbase, like the rest of the crypto industry, has faced regulatory scrutiny. In March, a court rejected Coinbase’s request to dismiss an SEC lawsuit accusing the trading platform of operating an unregistered securities exchange.
