Coinbase Off to a Running Start as Platform Grows

Cryptocurrency exchange Coinbase has reported its highly anticipated second-quarter results. The San Francisco-based company saw its shares trade under pressure leading up to the earnings report on Tuesday. On Wednesday morning, however, the stock climbed 6% higher once the results were clear. Coinbase shares are trading at approximately USD 285 at last check compared to a peak of more than USD 400 on the stock’s maiden day of trading in April.

In Q2, Coinbase surpassed Wall Street expectations, with total revenue coming in at USD 2.2 billion, including USD 1.9 billion in transaction revenue. Net income came in at USD 1.6 billion thanks in part to a tax benefit, while EBITDA was USD 1.15 billion.

Trading Volume Surge

Coinbase experienced trading volume of USD 462 billion, surpassing expectations of USD 382 billion as investors flocked to cryptocurrencies like Bitcoin and Ethereum. The high volatility in cryptocurrency prices is generally positive for crypto exchanges considering they generate fee income from the trades.

In particular, Coinbase experienced a surge in demand for Ether, which actually came in higher than the trading volume for the largest cryptocurrency, bitcoin. Ethereum represented 26% of Coinbase’s overall trading volume in Q2 vs. 24% for bitcoin. “Other” crypto-assets represented the remaining 50% of trading volume.

Another closely watched metric was the number of retail monthly transacting users, and here again, Coinbase delivered. The company saw a 44% spike in this figure to 8.8 million vs. Q1 results. Cryptocurrency prices were particularly volatile in the period, with bitcoin attaining a fresh all-time high in April only to tumble nearly 50% the following month. The Ethereum price followed a similarly volatile path in the quarter.

“Despite price movements, we saw billions of dollars of net asset
inflows and new customers added throughout Q2.”

In addition, institutional adoption appears to be growing with more than 9,000 institutions using the Coinbase platform. Coinbase revealed that it has inked partnerships with high-profile investors including:

• Elon Musk
• SpaceX
• Tesla
• Third Point
• WisdomTree Investments
• PNC Bank

Growing Crypto Demand Is Good for Coinbase

In addition, demand for bitcoin could strengthen after movie chain AMC Entertainment announced that it plans to start accepting BTC payments by year-end. Bitcoin has a greater chance of reaching mainstream adoption as more businesses potentially follow in AMC’s footsteps.

Investors who are bullish on digital assets such as bitcoin and Ethereum might also be bullish on Coinbase’s stock. The more that the cryptocurrency industry grows, the better it is for Coinbase shares.