By David DiMolfetta
Coinbase Global Inc. has profited more in the first three months of 2021 than it did in all of 2020, a sign of the platform’s potential as it prepares for its direct listing on the Nasdaq next week.
In its estimated first quarter 2021 results, Coinbase is projecting net income between $730 million and $800 million on revenue of $1.8 billion. In 2020, the company earned $322 million on revenue of $1.3 billion.
Its growth has been primarily backed by Bitcoin, the most popular cryptocurrency listed on the platform as its price skyrocketed past $60,000 in the first quarter of 2021. Surging demand with other assets, including separate classes such as the nonfungible token, also largely contributed to the company’s success.
Coinbase’s expected performance is based mainly on cryptocurrency price cycles, which typically last from two to four years, the estimate said. It added that around 6.1 million monthly transaction users (MTUs) were present on the platform for Q1.
For its annual earnings projection, Coinbase said that the amount of MTUs on the platform is “highly correlated” to transaction revenue and presented three scenarios where the amount of MTUs on the platform can grow in the coming months. Its highest estimate put the figure at seven million users for 2021.
Cryptocurrency has been riding on a wave of optimism in recent months, as tech, finance, and even governments are helping to make the esoteric payment method trendier than ever before. Digital payment giant Visa Inc. announced on March 29 it will become the first of the major payment companies to settle digital currency transactions. Encrypted messaging app Signal will be integrating support for MobileCoin in making crypto transactions available between two parties. Last month, PayPal will acquire cryptocurrency security firm Curv as part of its push into digital tokens.
China recently launched the digital yuan, which the nation’s central bank will regulate. Beijing plans to position the currency for international usage, the Wall Street Journal reported April 5.
Analysts expect that various American financial regulatory bodies, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Department of Justice (DOJ), and Consumer Financial Protection Bureau (CFPB), will continue enacting standard procedure in regulating American financial activities during the Biden administration. Still, they anticipate novel regulatory developments in cryptocurrency.
“At this point, the CFPB is taking complaints related to crypto but has not brought enforcement actions,” said Paul Watkins, the managing director at Patomak Global Partners, on March 26. “It will be very interesting to see how this builds out, especially in a defiant, decentralized finance space where there are now products being developed that are looking more like consumer products.”
Coinbase will begin trading on April 14 and is the first company of its kind to go public. It plans to register some 115 million shares of Class A common stock, which will trade under ticker symbol COIN.
