Coinbase is poised for a promising earnings report this week, buoyed by a notable surge in trading volumes following the recent US presidential election results. According to cryptocurrency researcher Kaiko, the exchange experienced its highest weekly trading volumes in two years during the closing months of 2024. This spike is primarily attributed to pro-crypto President Donald Trump’s election victory in November, an event that has proven beneficial for Coinbase’s financial outlook.
Since Trump’s victory on November 5, Coinbase’s stock, COIN, has seen a significant increase of approximately 40%, as per Google Finance. The rise in trading activity is mainly driven by institutional investors, as retail trading activity continues to lag. Kaiko notes that retail trading, previously contributing 40% of volume in 2021, has dwindled to 18%, thereby impacting Coinbase’s revenue from trading fees.
In addition to Coinbase, several major US crypto entities, including Bitcoin mining firms Hive Digital and Hut 8, as well as exchanges like CME Group and Robinhood, are set to announce their earnings within the same week.
Despite the slowdown in retail trading, Coinbase has managed to diversify its revenue streams in 2024, seeing a substantial rise in earnings from subscriptions and services. However, trading remains integral to its revenue model, contributing over half of its income. Although these new revenue streams are growing, they largely depend on activity in the crypto market and don’t offer a buffering effect during market downturns, according to Kaiko.
The resurgence in trading volumes post-election highlights a renewed enthusiasm for cryptocurrencies as an asset class. President Trump, who has expressed ambitions to transform America into “the world’s crypto capital,” has played a pivotal role in this resurgence. For instance, Galaxy Digital, a cryptocurrency trading firm, recorded its biggest trading day of 2024 on the US election day, driven by a spike in interest following Trump’s win.
Coinbase’s support for Trump during the campaign positions it well to capitalize on the favorable political climate. Regulatory challenges had been mounting from the SEC, but Michael Miller, an equities researcher at Morningstar Inc., anticipated a reduction in regulatory pressures under the new administration, especially concerning Coinbase’s Ether (ETH) staking business. Coinbase, which operates the second-largest ETH staking operation following Lido, saw a net outflow of about 1.3 million ETH in the last quarter of 2024, according to Kaiko.
This context of political support and trading enthusiasm bodes well for Coinbase as it continues to navigate the evolving cryptocurrency landscape.
