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Why Coinbase surged 27.8% in the first half of 2024
Actions of Coinbase Global (NASDAQ: COIN) rose 27.8% in the first half of 2024, according to data from S&P Global Market Information.
Following approval by the Securities and Exchange Commission to stain Bitcoin ETFs earlier this yearcryptocurrency exchange operator has benefited from strong Bitcoin prices. Active cryptocurrency trading has benefited Coinbase’s platform, which saw an increase in volume in the first quarter.
Trading volume exploded earlier this year
Coinbase, one of the largest cryptocurrency exchanges, performs well when volume increases, as transaction revenues make up a significant portion of its overall business.
Its first-quarter earnings results crushed it, and the company saw an explosion in trading volume, with $312 billion passing through its platform. That was a 102% increase from the previous quarter and a 115% increase from the same period a year earlier. Its institutional trading platform, Coinbase Prime, saw record trading activity and an unprecedented number of active customers in the quarter.
The company also saw solid growth in subscription and service revenue, a growing part of the business that can provide more stable and predictable revenue. As a result, its earnings skyrocketed, with revenue increasing 115% year over year. The company posted $1.2 billion in net income, a dramatic increase from a year-ago loss of $79 million.
COIN Revenue Chart (Quarterly)
What’s next for Coinbase?
In March 2023, the SEC issued a Wells Notice to Coinbase, signaling its intention to take enforcement action against the company for suspected violations of securities laws. The SEC argues that certain digital assets on Coinbase’s platform are securities and that the company should register as an exchange. This legal battle is ongoing, although recent legal developments could create a much more favorable environment for Coinbase in the long run.
Cryptocurrencies represent a high growth opportunity for investors with a high tolerance for risk and the ability to withstand the volatility that comes with it. Coinbase is a perfect example, down 86% in 2022 and up 417% in 2023 and again this year. Today, the stock’s price-to-earnings ratio is 42.7 and the price/sales ratio stands at 14.5, which puts its current valuation on the more expensive side and makes it more vulnerable to volatile price swings.
However, Coinbase is at the center of the cryptocurrency and digital currency economy, offering additional products and services such as stablecoins, staking, financing, and custody to diversify its volatile earnings; furthermore, its position in this fast-growing sector makes it an attractive stock for long-term investors today.
The story continues
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Courtney Carlsen has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
Why Coinbase surged 27.8% in the first half of 2024 was originally published by The Motley Fool