Coinbase also buys coins! With the new FASB standard, next quarter's profits will increase significantly.

The U.S. compliant exchange Coinbase recently announced its financial report, revealing that it finally achieved profitability for the full year of 2023 thanks to the bullish sentiment in the crypto market driving trading growth. However, hidden in the annual report is the fact that Coinbase quietly purchased cryptocurrencies such as Bitcoin for itself in 2023. With the implementation of FASB accounting standards, the rise in cryptocurrency prices is expected to bring in profits of over a billion dollars for the company.

Purposes of Coinbase Holding Cryptocurrencies

According to its annual report, Coinbase holds cryptocurrencies such as Bitcoin, Ethereum, and SOL for the following main purposes:

• Investment in Cryptocurrencies: These cryptocurrencies are considered long-term holdings and Coinbase does not intend to engage in regular trading of cryptocurrencies. Derivative products or other financial instruments are used for hedging based on market conditions.
• Operational Cryptocurrency Holdings: These cryptocurrencies are used to pay company expenses denominated in cryptocurrencies, including miner fees, staking rewards, promotions, and marketing expenses.
• Borrowed Cryptocurrencies and Related Collateral: Coinbase borrows fiat and cryptocurrencies from eligible institutional clients. These loans are generally indefinite or for a term of less than one year. Since these amounts are relatively small and not purchased by Coinbase, they are not included in the analysis below.

Coinbase Holds 9,000 BTC and 120,000 ETH

Based on the prices of BTC/ETH/SOL on 2023/12/31 as published by CME at 42,491/2,285/103, Coinbase holds approximately 9,351 BTC, 128,047 ETH, and 706,709 SOL for investment and operational purposes.

The fair market value exceeds the cost by $736 million.

Cryptocurrency to Be Evaluated at Fair Value in 2024

The Financial Accounting Standards Board (FASB) released new accounting standards last September, allowing companies holding cryptocurrencies like MicroStrategy to display the market value of their cryptocurrency assets in financial statements.

FASB implemented fair value accounting standards by year-end, benefiting companies holding cryptocurrencies such as MicroStrategy and Coinbase.

However, despite the significant increase in cryptocurrency prices, both MicroStrategy and Coinbase did not utilize the new accounting standards in their recent fourth-quarter financial reports.

Nevertheless, Coinbase has announced in this report that it will adopt the new accounting standards starting in 2024. Based on the fourth-quarter financial report, the appreciation of its cryptocurrency holdings amounts to $736 million, contributing $3.07 EPS.

COIN Stock Reaches Near Two-Year High

With the recent rise in Bitcoin, the launch of Bitcoin spot ETFs, and better-than-expected financial reports, Coinbase's stock price has been steadily increasing, reaching a near two-year high.

Trading rebounded, Coinbase achieved full-year profit in 2023, and the stock price surged by 14%.