Crypto exchange Coinbase (COIN) is anticipated to announce robust fourth-quarter earnings and revenue when it reports its financial results on Thursday. Analysts predict that the increased trading volume, driven by a market rally during the quarter, will contribute to the positive performance.

Investment bank Needham's analyst John Todaro, who holds a buy rating on the stock, expressed confidence in a strong quarter for Coinbase, citing the return of volumes to the space and stable interest income. The rebound in prices in the digital currency market, particularly supported by the approval of spot bitcoin exchange-traded funds (ETFs) for trading in the U.S., further bolstered trading volume.

Coinbase's trading platform peer, Robinhood, recently reported a 10% increase in crypto revenue during the fourth quarter, a trend that is expected to reflect similarly for Coinbase due to its revenue generation from trading fees.

FactSet consensus estimates indicate an expected increase in Coinbase's revenue from $674.1 million in the previous quarter to $826.1 million for the fourth quarter. Additionally, trading volume is forecasted to rise to $142.7 billion compared to $76 billion in the third quarter. Analysts also project an earnings per share of $0.02, in contrast to the previous quarter's loss of $0.01 per share.

Despite positive expectations for higher fourth-quarter numbers, analysts hold varying opinions about the implications of Coinbase's involvement in spot bitcoin ETFs. Mizuho analyst Dan Dolev, who has an underweight rating on the stock, warns that the company's custodial service for eight out of ten spot bitcoin ETFs may have negative implications for Coinbase in the future. Outflows from ETFs, primarily driven by Grayscale's Bitcoin Trust (GBTC), have exceeded the inflows for the funds that Coinbase provides custodial services for, resulting in a drag on Coinbase's ETF-related assets under management (AUM).

On the other hand, Devin Ryan, Director of Financial Technology Research at Citizens JMP, believes that the ETFs have a broader impact, driving more interest in the space beyond just the price of bitcoin. Needham's John Todaro supports this perspective, asserting that the launch of bitcoin ETFs will not lead to a decrease in trading fees on Coinbase as the company's market share remains well-protected.

Furthermore, Coinbase's recent launch of an offshore derivatives exchange is expected to generate significant trading volume, providing potential for growth. Traders are advised to pay attention to the company's guidance on expenses, which will serve as an important metric as Coinbase continues to invest.

Coinbase's stock rose approximately 13% on Thursday following the announcement, along with other crypto-linked stocks, as the price of bitcoin surpassed $51,000.

These predictions and insights anticipate an optimistic fourth-quarter report from Coinbase, highlighting the positive impact of increased trading volume and market activity.