"Never give up" is a song by Brian Armstrong, released as an NFT in 2021, which he composed together with DJ DAVI. The line also aptly describes the life motto of the amateur musician, entrepreneur, investor, managing director and co-founder of Coinbase. After the IPO of the largest trading platform for crypto-assets in the USA almost exactly three years ago, the share price took a steep dive. The share price fell by a tenth within around 12 months. But capitulating was not an option for the 41-year-old. Armstrong, one of the pioneers in this sector, was unwavering in his belief in the future of cryptos and, as things stand today, he was proved right: the price rose exponentially in the course of the recent Bitcoin rally.
The so-called crypto winter, i.e. the phase in which Bitcoin & Co. bobbed along far below their highs, ended in October last year at the latest. Above all, the anticipation of the first spot Bitcoin ETFs, which were ultimately approved in January 2024, prompted investors to buy into the digital coins again. A look at the price performance of the oldest cyber currency shows that it was not so much a spring awakening as a heated summer rally that followed. Bitcoin rose by 163% over a five-month period, while Coinbase shares more than tripled in value during this period.
However, the crypto trading platform has not only benefited from the boom in digital currencies recently, but has also managed to impress with its operating business. The company managed to break even in the final quarter, its first positive quarter since the end of 2021, reporting a net profit of USD 273 million from October to December, compared to a loss of USD 557 million in the previous year. The good result is based, among other things, on radical cost reductions, the headcount was reduced by more than 30%, and higher revenues. Sales climbed by 51% to USD 953 million, significantly exceeding expectations of USD 826 million. Transaction income, which accounts for the largest share of revenue, almost doubled compared to the previous quarter to USD 529 million. The lion's share of trading is now accounted for by the two largest cyber currencies Bitcoin and Ethereum (see chart). The remaining revenue was generated from subscription and service income.
With the figures presented, Coinbase says it has achieved its self-imposed target for 2023 of positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA): "We have achieved a net profit of USD 95 million in all 4 quarters and positive adjusted EBITDA of almost USD 1 billion in total," is the message from the company. Growth is expected to continue. CFO Alesia Haas is planning a "modest increase" in the number of employees this year in order to support product growth. In addition, the manager also sees a positive impact of Bitcoin ETFs on the industry as a whole through "increased engagement". In addition, Coinbase acts as custodian for 8 of the 10 spot Bitcoin ETFs and should benefit from increasing custody fee income as inflows into the fund increase. Coinbase is targeting a positive adjusted EBITDA for the first quarter.
The current positive sentiment cannot be dampened by an ongoing SEC lawsuit. The US Securities and Exchange Commission is accusing Coinbase of failing to register with the regulator. According to the SEC, disclosure requirements to protect investors have been circumvented since at least 2019. However, the company is not aware of any culpability and sees the solution in long overdue legislation that allows fair rules to be established transparently and applied evenly. Ultimately, it is now up to the US Congress to impose clear rules on the crypto market.
April marks the third anniversary of Coinbase's stock market listing. In retrospect, there have been strong ups and downs. After the sharp price slump described at the beginning, the share has just returned to its starting position - the IPO price was USD 250. After the figurative V-shape, investors will undoubtedly find it difficult to jump directly onto the bull bandwagon. However, this is not necessary in order to achieve attractive returns with the crypto stock. The high price fluctuations of the share ensure excellent conditions for yield-optimization products such as the reverse convertible. Leonteq's new soft-callable reverse convertibles are proof of this. The strike level is set at a low 50% of the initial value, so that the structure of the Coinbase share allows for setbacks of just under half without reducing the profit opportunity. The decisive factor for the maximum return is that the underlying asset is quoted above the strike at maturity. If this is at or below the low strike price at the final fixing, the investment may end in negative territory. However, the guaranteed coupon will be paid out in any case. The CHF-denominated product offers the prospect of an interest payment of a high 13.00% p.a.. Even more can be achieved with the USD variant. This even offers a coupon of 17.00% p.a. with otherwise identical features. Both instruments have a maximum term of 18 months and the first observation date is after 6 months.
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