Coinbase, one of the world’s largest cryptocurrency exchanges, reported a remarkable turnaround in its first-quarter financial results on Thursday (May 2).

The company swung to a staggering $1.2 billion profit, or $4.84 per share, for the three months ended March 31, a stark contrast to the $79 million loss, or $0.34 per share, it posted a year earlier.

This dramatic shift in fortunes came on the heels of surging cryptocurrency trading volumes, fueled by the launch of the first U.S.-listed exchange-traded funds (ETFs) tracking Bitcoin in January.

Coinbase profits rise with the launch of Bitcoin ETFs

The SEC’s approval of several spot bitcoin ETFs ignited a frenzy in the crypto markets. Coinbase, serving as the custodian for multiple spot Bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust, reaped the benefits of this renewed investor enthusiasm. Bitcoin prices skyrocketed to a new all-time high above $72,000 in March, driving trading volumes on Coinbase’s platform to $312 billion, more than doubling from $145 billion a year prior.

CEO Brian Armstrong attributed the company’s success to its focus on cost management and innovation. “Keeping our cost structure low while continuing to innovate is really paying off,” he remarked during a call with analysts reported Reuters.

But despite these results, Coinbase shares dipped 2.5% in after-hours trading, with concerns mounting over potential decreases in trading volumes due to recent bitcoin price fluctuations.

The crypto rally has faced headwinds this week, as investors reassess interest rate expectations. The U.S. Federal Reserve maintained its elevated interest rate on Wednesday (May 2), signaling a cautious approach to eventual rate cuts amid disappointing inflation readings. This uncertainty has weighed on bitcoin’s performance.

Coinbase has capitalized on higher interest rates by boosting its interest income, particularly from USD Coin (USDC) reserves. The company’s interest and finance fee income rose to $66.7 million in the first quarter, up from $43.3 million a year earlier.

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