Cryptocurrency exchange Coinbase surpassed profit forecasts for the fourth quarter on Thursday, driven by increased trading volumes in Bitcoin and other digital tokens following the US elections.
Unprecedented interest in cryptocurrencies, fueled by Donald Trump's victory in the presidential elections in November, pushed Bitcoin above $100,000 in the quarter as investors anticipated more crypto-friendly policies under the new administration.
Trump promised to make the US the "crypto capital of the world." Paul Atkins, his pick for head of the Securities and Exchange Commission, is known for his pro-crypto views — a sharp contrast to former head Gary Gensler, who compared the industry to the "Wild West."
"We’re really entering a golden age for cryptocurrencies here. We have an unprecedented opportunity to update the financial system and increase economic freedom worldwide, as the regulatory burden is lifting," said CEO Brian Armstrong during the earnings call.
Coinbase earned $4.68 per share for the three months ending December 31, whereas analysts had expected a profit of $1.81 per share, according to data gathered by LSEG.
The profit included $476 million in pre-tax profits from its crypto-assets investment portfolio. Transaction revenue surged 172% to $1.6 billion. Revenue from the subscription and services segment, which houses businesses outside of trading, grew 15% to $641 million. Overall revenue rose to $2.3 billion from $953.8 million a year earlier.
"Compared to Robinhood, whose earnings we saw yesterday, Coinbase has a much broader range of tokens available for trading and already offers a number of additional services like staking and access to stablecoins," said Ava Labs president John Wu.
His offering will only get richer as we see more regulatory clarity around cryptocurrencies in the US, but to protect its market share, Coinbase must continue to diversify further from retail trading and penetrate the institutional trading community, he added.
The competition in the crypto trading market is intensifying, with rival Robinhood being a popular option for traders looking to make bets on digital currencies.
Although it offers fewer tokens than Coinbase, the company has steadily gained market share and is set to gain even more ground under the leadership of a crypto-friendly SEC, according to a Bernstein note last month.
On Wednesday, Robinhood reported a 700% surge in transaction revenue for the fourth quarter from cryptocurrency trading.