COIN rides the Bitcoin wave to an all-time high
1min read Bitcoin (BTC) has witnessed a remarkable surge, breaking above $60,000 and approaching its all-time high, evoking the fervor of the 2021 boom. This ascent represents a nearly 19% increase for the week and 43% for the year, fueled by the launch of new spot Bitcoin exchange-traded funds (ETFs) in January.
The excitement around these ETFs, which have seen over $6.7 billion in net flows, along with a trading volume that surpassed any quarter in 2023, has positively impacted major trading platforms like Coinbase Global and Robinhood, with their stocks appreciating significantly since January. The bitcoin futures market has also reached a new zenith, with about $25 billion in open contracts, signaling strong market optimism.
Coinbase (COIN) has been one of the biggest beneficiaries of the move. The platform is the custodian for 8 of the 11 Bitcoin ETFs and directly benefits from the increased activity. The stock is up 27% over the past week and 56% since the ETF launch. The stock is trading at 224x forward earnings and 16x price to sales making it very expensive.
COIN significantly exceeded fourth quarter 2023 expectations and offered a positive outlook for the first quarter of 2024, reporting its first EPS profit since the last crypto bull market peak. Despite a challenging macro environment, COIN managed to reduce operating expenses significantly while achieving robust revenues and profits. The company's strategic initiatives, including launching new products like derivatives and expanding into new markets, have positioned it well for future growth. The introduction of spot Bitcoin ETFs in the U.S., a development that has had a positive effect on Coinbase, contrary to some investors' concerns, has contributed to elevated engagement levels and net inflows from customers.
Looking forward, the anticipation around crypto asset prices and trading volumes remains high, bolstered by events such as the upcoming Bitcoin halving and the ongoing impact of spot ETFs. Coinbase's strategic positioning and operational efficiencies are expected to drive continued market share expansion and solidify its leadership in the U.S. exchange market. With transaction revenue expectations set high for the first quarter of 2024 and projected increases in subscription and services revenue, Coinbase's future looks promising, underscored by a significant upward revision in its price target.
The underlying reasons for Coinbase's benefit from higher Bitcoin trading volumes include transaction fees, spread revenue, increased liquidity, asset management and custodial services, and the potential for diversification and growth. These factors collectively enhance Coinbase's revenue streams and solidify its position in the cryptocurrency exchange market, capitalizing on the increased trading activity and the broader bullish sentiment in the crypto sector.