Coinbase Poised for Strong Q4 2024 Earnings Amid Surge in Trading Volume and Layer-2 Growth

This week’s State of the Network report from @coinmetrics offers an insightful preview of Coinbase’s Q4 2024 earnings. The report is from Research Analyst @TanayVed.

He highlights the factors that have positioned the company for what could be an exceptional quarter, indeed. The report notes that trading volume has been surging, stablecoin supply is growing, and performance from Coinbase’s Layer-2 network has been strong. All of this adds up to the appearance of a well-run ship heading into the next earnings report.

The report also highlights a strong recovery in transaction revenue and the robust performance of Coinbase’s subscriptions and services segment—both on track to become contributors of a potentially strong Q4. As the cryptocurrency market continues to recover, the trading volume and adoption of Layer-2 solutions by an increasingly diverse set of customers places Coinbase in an incredibly strong position heading into the last quarter of 2023.

Multiple crucial elements have led to a positive perspective on Coinbase’s earnings for Q4 of 2024, with a first look at some figures giving a pretty darn good impression. When you hit play on Coinbase right now, and you start to look at the numbers, and you pull up the official reports, when you get right down to it, the main thing that’s happening is you’re seeing demand for trading on Coinbase and that push toward engagement in general. Diving deeper into that, the main thing that’s lending to that push right now, the main thing that’s driving up the earnings potential for Coinbase, is activity in the whole trading space.

Besides the increase in trading activity, the supply of $USDC, one of the most well-known stablecoins in the crypto market, grew 23% during the quarter. This boost in the stablecoin supply is expected to lead to an increase in Coinbase’s stablecoin revenue—a significant part of its subscriptions and services segment. “By driving stronger trading volumes and revenues, this is a clear positive for the firm,” says analyst Michael Perry—a view that seems to be shared by most followers of the stock.

Coinbase’s Q4 performance benefits from another key factor: success with @Base, the exchange’s Layer 2 network. Layer-2 solutions, which help augment the scalability and efficiency of blockchain networks, have seen prominent traction within the crypto space in recent months. Base, Coinbase’s proprietary Layer-2 network, generated a total of 8,047 $ETH (valued at $26.36 million) in sequencer revenue during Q4. Furthermore, it reported 7,417 $ETH ($24.18 million) in profit, showcasing the burgeoning success and profitability of Coinbase’s Layer-2 operations.

Base’s ongoing performance, along with that of other Layer-2 initiatives, demonstrates that Coinbase is building and scaling infrastructure that enhances the user experience and supports growth. Layer-2 solutions are gaining traction within the cryptocurrency sector, and Coinbase appears well positioned to benefit from its early investment in this technology.

Considering the robust trading volume, not to mention all the other things going really well at Coinbase (stablecoin growth, Layer-2 profitability), we’re estimating right now that the company will report around $1.59 billion in revenue for Q4 2024. But there are some signs that make us think Coinbase could actually beat our estimates and hit closer to $2 billion. That would be a 65% increase from Q3 and a 109% increase from Q4 2023.

If these estimates hold true, it would be a significant achievement for Coinbase, showcasing the triumph of its business model in an increasingly volatile sector. The estimates are promising, suggesting the company will report net revenue between $665 million and $745 million for 2022, with total assets measuring between $65 billion and $75 billion. If those numbers hold up, they’d represent a 22 percent increase in total net revenue year over year from 2021, which was $330 million. And they’d also suggest, by my math, that Coinbase’s annualized revenue run rate is at least $1.33 billion at this moment in time.

The upswing in trading volume and the rising acceptance of Coinbase’s products point to a company that is gaining from a fresh wave of optimism in the cryptocurrency space. With every passing day, this space seems more and more to be the arena where institutional investors and retail users really want to be. If the trading and adoption trends play out—with the way things have been going, they seem to be playing out quite nicely for Coinbase—then the company’s Q4 earnings report should put a smile on the faces of its shareholders.

All signs suggest that Coinbase is in line for a strong showing as it closes in on the release of its Q4 2024 earnings. The exchange’s trading volume has surged, its stablecoin supply continues to grow, and its Layer-2 network proves ever more successful. Taken together, these developments could pave the way for a revenue figure that bests the $2 billion mark. If this is the case and if we see the sum of Coinbase’s parts translate into an impressive whole, then I believe what will be on display is not just an exchange’s ability to profit during bull market conditions, but a sign that Coinbase has successfully maneuvered through the ever-changing crypto landscape.

In the future, Coinbase’s investments in stablecoins and Layer-2 solutions, along with its continued expansion of product offerings, place the company in an extraordinarily strong position to retain and enhance its leadership within the cryptocurrency market. As the industry undergoes evolution, Coinbase’s talent for innovation and adaptation will be vital in keeping its growth momentum moving forward. For the moment, Q4 2024 seems like it will be a strong finish for Coinbase, marking yet another milestone in its unfolding success story.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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