By Manya Saini and Niket Nishant
(Reuters) -Coinbase Global shares jumped closer to a two-year high on Friday after the crypto exchange posted its first quarterly profit since 2021, benefiting from a trading volume surge in the run-up to the approval of spot bitcoin exchange traded funds (ETFs).
The stock rallied 14% to $189.28 and added more than $5 billion to the company's market value.
Trading fees for Coinbase (NASDAQ:COIN) improved as investor interest in popular crypto tokens such as bitcoin rose since the second half of 2023 in anticipation of an approval for spot bitcoin ETFs.
The company also quashed worries about the ETFs cannibalizing its fees in response to some analysts warning that users may shift to low-cost ETFs instead of holding the assets directly.
"While we believe that the bitcoin ETFs could take some trading volumes away from Coinbase, their injection into the market, driving higher overall spot prices and trading volumes provide momentum to Coinbase's business," analysts at Canaccord Genuity wrote in a note.
Even after the approval of the ETFs last month, Coinbase has generated transaction revenue of $320 million in the first quarter as of Feb. 13, more than 60% of what analysts are expecting for the entire three-month period.
JPMorgan analysts, however, said a potential loss of trading volume was still possible for Coinbase.
"Considering Coinbase's direct participation and monetization efforts, we were hoping management would have provided more robust insight into the economics of the arrangements with issuers," the brokerage said.
The exchange is the custodian partner for eight of the 11 approved ETFs. It reported a profit of $1.04 per share for the fourth quarter after the bell on Thursday, compared with a loss of $2.46 a year earlier.