Coinbase, a major California-based cryptocurrency exchange, reported extremely high growth numbers for Q1 as the company prepares for its much-anticipated IPO (initial public offering).
An 850% Increase in Q1 Revenue Amid Bitcoin Trading Frenzy
The company is expecting to report a Q1 revenue of about $1.8 billion on a trading volume of $335 billion. These numbers mark an eye-popping growth rate for the cryptocurrency exchange, which is preparing to conduct an IPO this month.
For the same period last year, the Bitcoin trading company reported business revenues of $190.6 million. Last quarter, Coinbase reported business revenue of $585 million. The number of verified users soared to 56 million as more and more people rushed to trade Bitcoin and other cryptocurrency assets amid the latest leg higher that saw the entire cryptocurrency market capitalization surpass $2 trillion.
“Crypto markets have observed four major price cycles since 2010 which have typically had durations ranging from two to four years. On average, these price cycles have increased the overall crypto market capitalization significantly from the prior cycle and attracted new users into the crypto economy,” the cryptocurrency business said in the press release.
“We believe that we can create long-term value throughout these price cycles.”
The cryptocurrency exchange saw its net income rise to between $730 million and $800 million from $31.9 million a year ago. The middle point of the range ($765 million) translates into a net income growth rate of nearly 2,300%. On an adjusted basis, EBITDA (earnings before interest, taxes, depreciation, and amortization) is estimated at $1.1 billion.
The number of monthly transacting users (MTUs) is now 6.1 million, while the cryptocurrency company controls 11.3% of all crypto assets ($223 billion). Over half of these assets are held by institutions that have rushed to get more Bitcoin exposure in their portfolios.
Looking forward, Coinbase said it is expecting “meaningful growth in 2021” fueled by transaction and custody revenue on the back of the increased institutional interest in cryptocurrency assets. The business offers three scenarios — high, mid, and low — for full-year outlook. The best scenario projects average 2021 MTUs of 7.0 million, followed by 5.5 million (mid) and 4.0 million (low).
“In terms of expenses, we intend to prioritize investment, including in periods where we may see a decrease in Bitcoin price. This is because we believe that scale is central to achieving our mission and it is still early in the development of this industry,” Coinbase added.
The IPO, which is expected to take place on April 14, will cost the company about $35 million. The company projects to spend between $1.3 billion and $1.6 billion on its technology, development, as well as administrative expenses.
The Coinbase IPO comes at a time when Bitcoin trades near its record highs around the $60,000 mark.
In a preliminary earnings report ahead of its IPO, the cryptocurrency trading exchange business Coinbase reported a rise of almost 2,300% in Q1 net income while business revenues soared about 850% to $1.8 billion from the $190.6 million reported a year ago.
Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."