Coinbase's Jump Highlights Crypto ETF Outperformance

Equity-based crypto ETFs are outperforming BTC and spot bitcoin ETFs.

kent
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Research Lead
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Reviewed by: etf.com Staff
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Edited by: Ron Day

Crypto-linked ETFs rose, highlighting their outperformance against bitcoin and other digital currencies, as shares of Coinbase Global Inc. (COIN) surged after the crypto exchange reported its first quarterly profit in three years. 

Share of Coinbase, the largest U.S. cryptocurrency exchange platform, jumped 16% in early afternoon trading after as the company reported a 64% jump in fourth-quarter transaction revenue driven largely by the Securities and Exchange Commission’s highly anticipated approval of the first spot bitcoin ETFs, which launched Jan. 12. Profit was $273.4 million, or $1.04 a share, compared with a loss of more than half a billion dollars in last year’s fourth quarter. Revenue topped analysts’ expectations. 

The strong quarterly earnings report for Coinbase, whose software allows individuals and institutions to buy, sell, trade and store cryptocurrencies, comes as the crypto stock and equity-based cryptocurrency ETFs continue to outperform bitcoin, as they did in 2023. 

BITQ, Crypto ETFs Outperform Spot Bitcoin ETFs 

The Bitwise Crypto Industry Innovators ETF (BITQ), which has a nearly 9% allocation to Coinbase, is up 24% over the past month as of Feb. 15. This equity-based crypto ETF significantly outperforms the largest spot bitcoin ETF, the iShares Bitcoin Trust (IBIT), which had an 18% increase over the 30-day period.  

BITQ, which is featured in etf.com’s 24 ETFs for 2024 series and is an ETF of the year finalist in the upcoming 2024 etf.com Awards, was one of the top-performing ETFs of 2023 with a gain of nearly 250%. This giant performance for the year eclipsed bitcoin’s price gain of roughly 150%. 

The Lure of ‘Pick and Shovel’ Crypto ETFs 

BITQ and other equity-based crypto ETFs have been coined as a type of “pick and shovel” investing, which is a strategy where you invest in the suppliers, tools, and services that are essential for an industry in high demand. It's inspired by the gold rush, where the real money wasn't made from panning for gold directly, but from selling picks and shovels to the miners. 

Instead of speculating on the price bitcoin, investors can choose to buy equity-based crypto ETFs, which hold bitcoin miners and companies like Coinbase, which can profit from high volume trading of bitcoin and other cryptocurrencies, even if the digital currencies are not themselves performing well. 

Crypto ETFs can also help to minimize market risk by diversifying across a range of crypto industry companies, rather than just one name like Coinbase.  

Still, as alluring as cryptocurrency and crypto stocks may appear, there are still significant market risks for investors to understand. For example, although Bitcoin has existed since 2009, the crypto investment market in terms of stocks and ETFs is still in its infancy and extreme price volatility is still to be expected. 

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.