Coinbase's financial report will reveal whether loose regulations can truly drive profits soaring.
Author: Caizijun, Jinshi Data
Donald Trump's return to the White House has given Bitcoin and Coinbase (COIN.O) investors more reasons to cheer. The new president has promised to promote the development of the U.S. crypto industry by easing regulations. After the market closes on Thursday, investors will find out if this celebration translates into higher profits.
According to analyst expectations compiled by FactSet, Coinbase is expected to report earnings per share (EPS) of $2.11 and revenue of $1.84 billion for the fourth quarter. This represents significant growth compared to the fourth quarter of 2023, which had an EPS of $1.04 and revenue of $954 million.
Trump's election is a positive signal for cryptocurrency prices and Coinbase's stock price. Since Trump's victory, Coinbase's stock price has risen by about 40%, reaching $272. Bitcoin's increase has been roughly similar, rising by 42% to $96,882.
The reason behind these increases is Trump's promise to make the U.S. the "global cryptocurrency capital" by introducing more lenient regulatory frameworks. Trump has appointed or nominated pro-crypto regulators to several agencies, including the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), and the Commodity Futures Trading Commission (CFTC).
Under the leadership of acting chair Mark Uyeda, the SEC has begun advancing a cryptocurrency working group aimed at developing a framework for the legal operation of the industry in the U.S., while venture capitalist David Sacks has led similar efforts at the White House.
These changes are crucial for Coinbase, as the SEC sued the company in 2023, accusing it of operating an unregistered securities exchange. Coinbase has contested this accusation. Under a Trump-led SEC, there is a high likelihood that the case will be dropped or some agreement reached, allowing Coinbase to continue operating as planned.
Coinbase did not respond to requests for comment. Company executives told Barron's last year that a shift in the SEC's stance could encourage Coinbase to offer more token trading and other cryptocurrency services, thereby driving revenue growth.
For Coinbase, regulatory changes are a double-edged sword. As regulators become more friendly, traditional brokerages may increase competition in cryptocurrency trading.
Analysts estimate that Coinbase's total trading volume in the fourth quarter will be $216 billion, up from $185 billion in the third quarter and $154 billion in the fourth quarter of 2023. While the growth is notable, it is still far below the $312 billion trading volume Coinbase recorded in the first quarter of last year, when the approval of Bitcoin spot exchange-traded funds (ETFs) sparked a renewed surge in cryptocurrency trading.
Investors will also be watching the continued growth of Coinbase's subscription and services business, which includes revenue earned from the stablecoin USDC. This segment is expected to generate $611 million in revenue, up from $375 million in the same period last year.
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