After making small gains throughout the week, shares of Coinbase, one of the largest cryptocurrency exchanges, jumped by almost 7% on the heels of a significant rate cut by the Federal Reserve. The company’s shares peaked at $174 mid-day Thursday before paring gains and closing at $168. The share price of Coinbase has long served as a proxy of sorts for the broader cryptocurrency market as it typically rises alongside the price of Bitcoin. The stock has also fared better during times of increased appetite for risk among investors, including this week following the Fed cuts.
The recent climb in the share price of Coinbase represents a significant comeback since last September when the stock dropped as low as $76 in the lead up to crypto fraudster Sam Bankman-Fried’s criminal trial.
Despite tumbling 13% in June and weathering its worst week of the year in August, Coinbase has made a recovery due, in part, to surging transaction revenue. In the first quarter of 2024, Coinbase reported $1.2 million in transaction revenue, almost equivalent to the entire year of 2023. Trading volume is up significantly on the platform from last year, signaling a resurgence of users.
It remains unclear if Coinbase will be able to maintain these gains but, as of Friday, shares remain around $169.
A large portion of Coinbase’s revenue comes from trading fees, making it often a good indicator of the crypto economy as a whole. Microstrategy, a cybersecurity firm whose CEO pivoted to make the firm the largest corporate holder of Bitcoin, also saw its shares gain this week, increasing by about 8% and holding steady. Meanwhile, the price of Bitcoin has risen around 10% in recent days, briefly reaching $64,000 early Friday morning.
All of this comes one day after Jerome Powell, the head of the Federal Reserve, announced long-awaited cuts to benchmark interest rates. The decision to cut rates by half a percentage point exceeded some analysts’ expectations who assumed the Fed would opt for a more modest cut.
