The company’s earnings also tell a story about the rally that has gripped digital assets in recent months—and it bodes well for
and other cryptos.
stock rose 15% in premarket trading on Friday after reporting earnings late Thursday of $1.04 a share on $954 million in revenue, beating expectations among analysts surveyed by FactSet of 2 cents a share in earnings on revenue of $826 million.
Shares in the company have ripped higher in recent months, outpacing gains across Bitcoin and other digital assets, which last year limped out of lows notched in a brutal bear market that lasted through much of 2022 and into 2023. Coinbase stock, while down almost 5% this year, has still more than doubled in the past six months, with the price of Bitcoin rising 80% over the same period to two-year highs.
Since a bulk of Coinbase’s business lies in its brokerage—with revenue driven by fees from buying and selling tokens—the company remains sensitive to digital asset market conditions, tending to do well during periods of intense volatility or bullish runs.
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The surge in Bitcoin prices in the fourth quarter helped Coinbase’s transaction revenue jump to $529 million from $289 million in the third quarter. The company’s outlook also bodes well for continued trading momentum in the current quarter: Coinbase said that it had generated some $320 million of transaction revenue as of Feb. 13, around halfway through the first quarter.
“We continue to urge caution in extrapolating these results,” Coinbase said in its earnings release—but that preliminary metric suggests that activity is growing, which is likely good for both the company and crypto prices.
Moreover, there are signs within Coinbase’s results that bullish sentiment is spreading beyond Bitcoin to other tokens.
Bitcoin’s share of Coinbase trading volumes fell to 31% in the fourth quarter from 38% in the third quarter. The trading volume share of
—the second-largest crypto—saw a milder decline, down to 15% in the last quarter from 19% in the prior period. Meanwhile, altcoins—smaller tokens beyond Bitcoin and Ether, like
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—saw a surge in interest, with their share of trading volumes climbing to 42% in the fourth quarter from 28% in the third quarter.
When the attention of traders turns to altcoins, it is typically a sign that bullish sentiment in crypto is spreading. Coinbase’s results show traders ditching Bitcoin and Ether—though leaving the second-largest token at a slower rate, which confirms this trend—in favor of smaller cryptos. While this suggests that bullish sentiment is strengthening—and, indeed, Bitcoin has gone on to hit a two-year high since the start of this year—it could also indicate that Bitcoin’s period of outperformance may soon be over in favor of altcoins.
All of it benefits Coinbase, though some analysts like Coinbase bear Dan Dolev of Mizuho Securities see altcoins as “lower-quality revenue,” as he wrote in a note after the broker’s results. Tell that to the market, though—betting against Coinbase stock has been a particularly bad bet over the past year, and continues to be so.
Write to Jack Denton at jack.denton@barrons.com
This article was originally published by a www.barrons.com . Read the Original article here. .