Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Coinbase was the financial dark horse of 2023. The crypto trading platform’s near 400 per cent surge in stock price trounced tech peers, exceeding even Nvidia’s 249 per cent gain.

Much of that rise can be attributed to excitement about positive regulatory action. Speculation is rife that the US Securities and Exchange Commission will soon approve exchange traded funds that invest in bitcoin directly. Coinbase stands to benefit by acting as custodian of bitcoins held by ETF funds.

Bitcoin cheerleaders hope that such vehicles will broaden the investor base and fuel a price rise. Bitcoin prices rose 160 per cent in 2023. This week they climbed above $45,000 for the first time since April 2022.

Yet even as investors pile into Coinbase shares and bitcoin prices rise, trading activity on the platform remains relatively subdued. The number of monthly transacting users stood at just 6.7mn at the end of the third quarter, down from 8.5mn a year ago. Trading volume slid by more than 50 per cent over the period, while total transaction revenue was a fifth lower.

Fourth-quarter results, due in February, should show an uptick. But this has already been baked into Coinbase’s valuation. Despite seven consecutive quarters of losses, the company trades on 16 times revenue, up from 1.6 times a year ago. Larger and more profitable exchange operators Cboe and the London Stock Exchange are on 5 times and 6 times respectively.

To its credit, Coinbase has diversified its revenue. Half now comes from subscription and services, which include its custody services, interest-earning assets and staking. Still, its fortunes are tied to bitcoin’s wild swings and regulatory attitudes towards crypto — two factors outside its control.

A decision on regulatory approval for spot bitcoin ETFs could be delayed. In the meantime, Coinbase is in its own fight with the SEC, accused of illegally running an unregistered securities exchange. It has failed to push the SEC to clarify whether digital assets are securities. Having enjoyed a surprising resurgence from a tumultuous 2022, Coinbase could struggle to hold on to its rich valuation this year.