Coinbase Outperforms Wall Street Expectations While Insiders Sale

Coinbase, the premier US crypto exchange, surpassed Wall Street predictions significantly. It reported a net income of $1.18 billion, or $4.40 per share, in the first quarter of 2024.

This remarkable achievement contrasts sharply with the prior year‘s loss of $78.9 million, or 34 cents per share. Notably, this quarter marks the company’s first profit in two years, a milestone revealed in February.

Coinbase Releases Q1 2024 Report

The substantial net income includes a $650 million mark-to-market gain on crypto assets. This gain follows the adoption of updated accounting standards by Coinbase.

The total revenue increased 72%, quarter-on-quarter, hitting $1.6 billion. The consumer transaction revenue soared to $935 million, doubling from the previous year. Additionally, subscription and services revenue played a significant role, contributing $511 million for the quarter.

“We made meaningful progress against our 2024 priorities of driving revenue, utility, and regulatory clarity. Our market share in US spot and derivatives increased, we reached all-time highs on Coinbase Prime, and USDC market capitalization increased. Coinbase One adoption remains strong, and our international business was a larger contributor to our growth,” Coinbase wrote.

The performance of Coinbases stock is closely linked to fluctuations in the crypto market, especially Bitcoin. In March, Bitcoin soared to a new all-time high of over $73,000.

Concurrently, Ethereum, the second-largest crypto, underwent the Dencun upgrade, its first major network enhancement in over a year. These developments led to a significant uptick in trading volumes on Coinbases platform.

Moreover, the crypto sector has seen a significant influx of institutional investors. This trend followed the SEC‘s approval of several US spot bitcoin exchange-traded funds, many partnering with Coinbase as their custody partner. By the quarter’s end, these funds had accumulated over $50 billion in inflows.

Following these strong earnings, Coinbase shares climbed nearly 9% on Thursday before the report was published and have increased approximately 32% year to date. However, the stock is still down by over 14.5% since April.

Coinbase (COIN) Price Performance. Source: TradingView

This is due to the crypto market correction that occurred in April. Bitcoin has been down by 16%, whereas some altcoins have recorded more than 50% correction from their local tops.

Analysts, including John Todaro from Needham & Co., express concerns about the companys Q2 performance.

“The Q2 is shaping up weaker than Q1, and the recent crypto price pullback has the potential to completely unwind the retail user gains we saw,” Todaro said.

Moreover, Coinbase faces ongoing challenges. The company is embroiled in a legal battle with the SEC, which a judge has ruled can proceed to a jury trial. This lawsuit alleges that Coinbase engaged in unregistered securities sales.

In addition, insider activity at Coinbase has garnered considerable attention.

According to CNBC, during the first quarter, insiders, including four C-suite members, collectively sold $383 million in company shares. This amount is more than double that of the previous quarter and the highest since Coinbases Nasdaq debut in 2021.

Fred Ehrsam, co-founder and board member, was the biggest seller, netting $129 million from his shares. This significant level of insider selling may indicate strategic shifts within the company, even as Coinbase navigates what could be a challenging second quarter.