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Coinbase posts soaring profit on jump in crypto prices

FILE PHOTO: Illustration shows smartphone with displayed Coinbase logo

By Hannah Lang

(Reuters) -Coinbase Global swung to a first-quarter profit of over $1 billion from a year earlier loss, helped by an uptick in cryptocurrency trading following the launch of the first U.S.-listed exchange traded funds (ETFs) tracking bitcoin in January.

The company on Thursday reported a net income of $1.2 billion, or $4.84 per share, in the three months ended March 31, compared with a loss of $79 million or $0.34 per share a year ago.

Coinbase shares fell 2.5% in after-hours trading, after ending the trading session up nearly 9%.

"Despite a very solid report, the stock traded lower after hours with concerns that trading volumes will decrease based on downward movement in bitcoin," said Paul Marino, chief revenue officer at investment firm GraniteShares.

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Crypto prices rocketed after the U.S. Securities and Exchange Commission approved the launch of a spate of exchange-traded funds (ETFs) tied to the spot price of bitcoin in January after a decade-long tussle with the industry.

Coinbase is the custodian for several of the spot bitcoin ETFs, including BlackRock's iShares Bitcoin Trust.

Enthusiasm about the ETFs sent bitcoin to a new record high above $72,000 in March and renewed investor enthusiasm in digital assets. Trading volumes at the Coinbase in the first quarter came in at $312 billion, compared with $145 billion a year earlier.

"Keeping our cost structure low while continuing to innovate is really paying off," said CEO Brian Armstrong on a call with analysts.

In recent weeks, however, bitcoin has struggled as investors have recalibrated interest rate expectations.

The U.S. Federal Reserve kept its benchmark rate elevated on Wednesday after tightening monetary policy at an unprecedented pace. It signaled it is still leaning toward eventual reductions in borrowing costs, but highlighted recent disappointing inflation readings that could put rate cuts further off.

Higher rates have allowed Coinbase to boost its interest income. Coinbase earns interest on reserves from USD Coin (USDC), a stablecoin it governs jointly with cryptocurrency firm Circle. USDC, a crypto token designed to have a relatively stable price, is backed by dollar and equivalent assets held in banks and other financial institutions.

Coinbase posted interest and finance fee income of $66.7 million in the first quarter, compared to $43.3 million the year prior.

(Reporting by Hannah Lang in New York; Editing by Michael Erman and David Gregorio)