Coinbase Crushes The Street’s Q4 Earnings Predictions

Well well well.

As expected, Coinbase (COIN) absolutely crushed their Q4 earnings.

What we didn’t expect, however, was for our down and dirty prediction for the company’s results to be spot on.

On Thursday, Coinbase reported revenues of $954 million. Not only was it a massive beat on the Street’s expectations of $824 million, but it was awfully close to our prediction of $968 million.

Real quick – we straight up did napkin math and somehow got a closer number than every analyst on wall street… and even some quality beat reporters. Honestly, we’re not sure if that’s a good thing or bad thing. 🤷

Anyway, let’s take a look at a few other things that caught our eye.

A Turning Point

Overall, the quarter seemed to have marked a turning point for Coinbase.

For the first time since 2021, the company reported positive net income, coming in at $273 million.

Previously, the company was keen on promoting “EBITDA” as the metric to watch. And while Q4 represented their fourth quarter in a row of positive adjusted EBITDA, as we have previously wrote:

In Q4 though, Coinbase created real net income, bringing the year’s total to $95 million.

What Else?

One interesting tidbit from Coinbase’s 10K was a note that the company owns 3.5% of Circle. Although the deal was first announced in August 2023, it was unclear just how much of a stake Coinbase had in the company.

Now we know... 3.5%.

With Circle looking to go public in 2024, as soon as the company puts out a valuation investors will be able to back out what Coinbase’s stake is.

A Word on ETFs Impact on the Business

By all measures it seems that the approval of spot bitcoin ETFs are a net positive for Coinbase.

As of today, the company provides custody to 90% of the $37 billion in bitcoin ETFs. Furthermore, Coinbase is the custody partner of five of the eight spot Ethereum ETF applications.

And while many people assumed that the ETFs would cannibalize Coinbase’s existing business, it turns out that so far – as also stated by Robinhood – the ETFs have been additive.

In the shareholder letter, the company also noted that “as of Q4, 33% of the 100 largest hedge funds in the world by reported AUM had chosen to onboard with Coinbase.”

A Focus on 2024

Looking beyond the company’s existing business lines, investors should pay attention to a few key metrics.

Crypto Payments: While most of the traditional media is focusing on Coinbase as an exchange, Coinbase is looking to the future of payments. The company has already launched the ability to send USDC instantly for free using BASE. We expect more to come quickly.

International expansion & derivatives: Since launching Coinbase International, the company is already doing more than $1 billion in volume per day.

Regulatory clarity: As always, regulation is still a key concern for Coinbase. But things are looking more positive than ever.

Overall, Coinbase is firing on all cylinders.

Don't Fall for the Bitcoin vs. Gold Trap

This topic caught our attention due to a chart circulating on social media this past week, illustrating a notable shift:

The gist is that outflows from Gold ETFs are increasing, while inflows into Bitcoin ETFs are on the rise. It was a big “look at this!” moment for the BTC vs. Gold crowd. Bitcoin appears to be eating gold’s lunch!

But in reality, a deeper look reveals a more nuanced picture…

Understanding The Context:

The Bigger Picture

Ultimately, bitcoin's market cap is still a tiny fraction of gold's. Let's be real.

In other words, we have a long way to go even start comparing the two in terms of investor preference and global recognition.

But back to the original chart, bitcoin should never be outright replacing gold anyway. As we’ve written about extensively before, investors should consider both gold and bitcoin for a well-rounded portfolio. Not just one or the other.

I get it – we all want bitcoin to succeed as the hardest, most scarce asset on the planet. There’s also gold bugs out there like Peter Schiff that sh*t on bitcoin all day, every day, and who only point to gold as the solution.

It sure is enjoyable to watch the naysayers look like idiots.

But in a rational view, both gold and bitcoin should coexist.

At the end of the day, the battle isn’t bitcoin vs gold… It’s scarce, unprintable money vs an Orwellian future. This is the only chart we should be focused on:

Speaking of Gold…

The best investors buy what everyone hates and sell the stuff everyone loves. And, at the moment, everyone loves tech while everyone hates gold (gold just hit all-time highs and the mining stocks haven’t even flinched).

But the great Stanley Druckenmiller might be giving us some signal here. This week, it was reported that he is buying Newmont (NEM) and Barrick Gold (GLD) and selling some of his tech positions.

If Druckenmiller is gradually de-risking out of tech… and accumulating exposure to unfavorable gold stocks… maybe we should start paying attention.

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