Why Coinbase Stock Jumped 43% Last Year

Shares of cryptocurrency company Coinbase Global (NASDAQ: COIN) jumped 42.8% in 2024, according to data provided by S&P Global Market Intelligence. The cryptocurrency space came roaring back to life throughout the year. And given that Coinbase is a leading cryptocurrency infrastructure company, it's not surprising to see it enjoy big gains.

The obvious catalyst for Coinbase were the big gains from Bitcoin (CRYPTO: BTC), the largest cryptocurrency in the world. Bitcoin's price increased by 119% last year. And whenever this happens, it fuels massive interest for the space generally, which is a tailwind for Coinbase.

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The less obvious tailwind for Coinbase was the adoption trend for USD Coin (CRYPTO: USDC). It's a stablecoin, and its price consequently shouldn't change. By contrast, its market capitalization does go up, and it highlights adoption trends.

USD Coin started 2024 with a roughly $25 billion market cap and ended with a market cap closer to $44 billion, according to CoinMarketCap. That 76% increase is consequential, as I'll explain.

Moreover, with the U.S. election cycle, many politicians aligned themselves with a pro-crypto message, including President-elect Donald Trump. This further bolsters confidence in long-term cryptocurrency adoption, to the likely benefit of Coinbase.

Multiple things are driving growth for Coinbase

Coinbase has only reported financial results for the first three quarters of 2024 so far. But revenue for those three quarters was 99% higher than the same three quarters of 2023. And if that's not exciting enough, the company already has nearly $1.3 billion in net income for the year.

Granted, much of this is the result of gains on its crypto investments. But the business is profitable as well.

Gains are coming from multiple areas. For starters, trading volume for retail investors is soaring -- in the third quarter, it was up over 200% year over year.

Revenue from enterprises was also up -- Coinbase is viewed as a trustworthy crypto partner for these customers with particular needs. For one example, as of Q3, there were 20 approved exchange-traded funds (ETFs) for crypto. Coinbase was the custodian for 17 of them.

Finally, USD Coin's controlling company, Circle, holds cash reserves so that users can quickly redeem stablecoins if they so choose. But it earns interest on these deposits. For its part, Coinbase also partly owns the project. Therefore, as the cash balance for USD Coin goes up (which is what its market cap shows), Coinbase earns more money for its share of the project.

Could Coinbase stock keep rising?

The cryptocurrency space notoriously has ups and downs. It's undeniably in an uptrend right now. And if this crypto bull market is as long as past ones, then 2025 could be another good year for crypto and crypto stocks such as Coinbase.

I'm cautiously optimistic about Coinbase's prospects in the coming year. But I'm also watching whether U.S. politicians bring greater clarity to the space in the coming year as promised.

In closing, there could be noteworthy regulatory changes in 2025 that are material for Coinbase's business long term.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.