Coinbase crypto holdings increased ninefold last year as bitcoin surged

Coinbase doesn’t just allow trading a bunch of bitcoins – it holds cryptocurrencies on its books.

In the company’s prospectus for public market investors filed Thursday, Coinbase disclosed ownership of crypto assets worth $ 316.1 million on its balance sheet as at December 31, nine times from 33. $ 9 million at the end of 2019.

Bitcoin jumped over 300% last year, while the digital currency ethereum jumped almost 500%, and they both extended their rally to start 2021. As Coinbase makes most of its money in allowing investors to trade, store and borrow crypto assets, the company is also placing its own bets on the trajectory of major digital currencies.

“Since our inception in 2012, Coinbase has held bitcoin and other crypto assets on our balance sheet – and we plan to maintain an investment in crypto assets because we strongly believe in the long-term potential of the cryptoeconomy,” Brett Tejpaul, manager from Institutional Coverage Coinbase, wrote in a blog post on Wednesday. “Investing in crypto assets has required us to develop new investment, accounting and tax policies, as well as to ensure that we have established a control environment in order to receive unqualified audit opinions on our financial state.”

The Coinbase revelations, ahead of its next direct listing on the Nasdaq, provided the first in-depth review of the company’s financial data. Revenue more than doubled last year to $ 1.1 billion, and the company posted a profit of $ 322 million after losing more than $ 30 million the previous year. Coinbase is poised to be one of the few high growth tech companies to generate more revenue than operating expenses when they debut in the public market.

Axios reported last week that Coinbase was valued at over $ 100 billion in a recent private market sale designed to help set a price for public investors. In a direct listing, companies allow existing investors to sell shares in the open market rather than selling new shares at a discount.

Coinbase’s crypto assets represent around 30% of the amount of cash and cash equivalents the company has on its balance sheet, down from just 6.2% at the end of 2019. Coinbase said as of December 31, Bitcoin and Ethereum made up 63% and 8% of total crypto assets held, respectively, excluding its borrowings. Bitcoin and Ethereum trading accounted for 56% of user volume, Coinbase said.

Coinbase classifies its crypto holdings as intangible assets, which means they are not physical items. The value of assets on Coinbase’s books can change depending on their fair market value. The company says it will perform “annual impairment tests” on October 1.

“A fall in the price may require us to take a depreciation charge on our crypto assets and a fall in the value of the crypto assets we hold in higher concentrations may have a greater impact on our operating results over the course of time. ‘a particular time period,’ Coinbase said in the prospectus.

Even as recent as the numbers are in its filing, they still can’t keep up with the fervor of the market. Since the start of 2021, bitcoin has grown another 70% and ethereum has doubled more. This means that if Coinbase updated its balance sheet based on current transactions, its holdings would likely be worth hundreds of millions of dollars more than two months ago.

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