Though Coinbase is expected to report quarter-over-quarter improvements amid the latest crypto price rally, analysts seek further guidance on whether the company can sustain such a recovery.

The crypto exchange is set to report its fourth quarter results on Thursday, and analysts will be watching to see if the company made money during the year’s final three months.

“I think expectations are for a pretty substantial recovery in Coinbase’s trading revenue with the company potentially being profitable during the quarter,” said Morningstar analyst Michael Miller. “The surge in cryptocurrency prices has translated to higher trading volume, which will be a significant tailwind for Coinbase.”

Bitcoin’s (BTC) price rose more than 50% during the fourth quarter ahead of the Securities and Exchange Commission approving the first US spot bitcoin ETFs on Jan. 10.

BTC surged above $44,000 in early December, rising by about 25% in a 30-day span. The asset’s price eclipsed $50,000 on Monday.

“The rally occurred in the middle of the quarter, so Coinbase didn’t see the full benefit [in Q4],” Miller told Blockworks. “But regardless, I expect the fourth quarter to be solidly better than third quarter results.”

Coinbase’s third quarter transaction revenue was $289 million, marking a 12% drop from the previous quarter. Still, the company’s adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — was positive for the third straight quarter, at $181 million.

Read more: Coinbase Q3 results signal its future as ‘crypto super app’: Analyst

Owen Lau, an executive director at Oppenheimer and Co., said he expects Coinbase’s revenue to increase 16% quarter over quarter — from $674 million to $784 million.

Lau estimates the company’s trading volumes from October through December to be $145 billion, which would be a roughly 90% increase from the third quarter.

Lau wrote in a January research note that Coinbase has a “good chance” of posting a positive earnings per share (EPS) figure — derived from generally accepted accounting principles (GAAP) — for the first time since the fourth quarter of 2021.

“Coinbase is widely perceived to be a non-profitable company,” Lau told Blockworks. “A positive GAAP EPS can help change this image.”

What else to listen for

While analysts expect a big quarter-over-quarter trading volume increase for Coinbase, Lau said he will be listening for where such volumes stand so far in 2024.

Average pricing on trading will also be important, Miller noted, as different users pay different fees. Retail users pay more than institutional traders, and such costs also vary based on volumes, he added.

“We know Coinbase has benefited from stronger cryptocurrency markets, but the intensity of that benefit depends entirely on where the extra volume is coming from,” Miller said.

Lau will also be listening for Coinbase executive commentary on what impact the new US spot bitcoin ETFs are having on the company, as well as possible implications if an ether ETF gains regulatory approval.

Coinbase serves as the custodian for a majority of the funds and would be expected to be in similar surveillance, custodial and trading roles for ether ETFs, JPMorgan analysts have said.

JPMorgan downgraded Coinbase to “underweight” in a Jan. 22 research note, calling flows into bitcoin ETFs so far “underwhelming versus the lofty expectations many in the crypto industry had established in the run-up to the approval.”

Net flows into the 10 spot bitcoin ETFs on the market have totaled roughly $2.6 billion, as of Feb. 9.

Read more: A month after launch, spot bitcoin ETF weekly net inflows hit new high

CFRA Research analysts also downgraded Coinbase last month over concerns the company could be forced to cut trading fees to compete with the new low-cost spot bitcoin funds.

Lau said he will also be listening on the Thursday call for an update regarding the company’s ongoing lawsuit with the SEC. While the regulator alleges that Coinbase operated as an unregistered securities exchange, the company has sought to get such charges, which it denies, dismissed.“

Beyond that, information on Coinbase’s derivative or international expansion efforts would be helpful,” Miller said.

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