Bithumb, South Korea’s largest cryptocurrency-to-fiat exchange, has increased its revenue 171-fold in 2017.
BTCKorea, the parent company of Bithumb, is a public company that is being traded on South Korea’s stock exchange KRX. It is required to publicly release its earnings and given that its only subsidiary company is Bithumb, the revenue and profit margins of BTCKorea are automatically that of Bithumb.
According to Coindesk Korea, Bithumb has increased its revenue by 171-fold in 2017, in comparison to its revenue in 2016. Bithumb takes 0.15 percent of every order as its operating fee, and the fee model remains as the main revenue stream of the cryptocurrency exchange.
In 2017, especially in its fourth quarter, the trading volume of South Korean cryptocurrency exchanges rose exponentially, as the demand for cryptocurrencies like bitcoin and Ethereum skyrocketed. Leading cryptocurrency trading platforms were sold at high valuations and the stock prices of publicly listed cryptocurrency exchanges surged. Korbit, the third biggest cryptocurrency trading platform in South Korea, was acquired for $150 million.
In 2017, Bithumb recorded a net income or profit of $420 million but recorded a revenue of 330 million. Investors in the public market were taken aback by the absurd numbers relayed by Bithumb, given that its net income was higher than its revenue, which is not possible in most cases unless the company makes substantial income outside of its main revenue model.
During an interview with Coindesk Korea, Bithumb representative stated that the company has made a profit of $90 million outside of its main business model and its cryptocurrency trading platform as non-operating income. Bithumb hinted that this may have been generated from office rental, interest rates, and investment gains.
“The details of Bithumb’s balance sheet will only be finalized on March 30, in a board meeting. As such, it is difficult to confirm any details of the company’s balance sheet in early April. Bithumb will likely introduce details of its earnings in late April,” said Bithumb.
Often, non-operating income comes from companies with properties that are being rented out to other individuals or businesses. For example, if Bithumb has a commercial building in the heart of Seoul it rents out to other businesses as it only uses a part of it, it can count as the company’s non-operating income. Hence, it is not included in the revenue of the company, but in its net income.
It is likely that Bithumb generated its non-operating income from its direct cryptocurrency investments, as it is possible that the company held funds in cryptocurrencies like bitcoin and Ethereum.
A similar situation occurred with Yahoo a few years ago, when they held a big chunk of Alibaba shares. As the price of Alibaba stock surged, Yahoo’s non-operating income increased as well, boosting the company’s balance sheet.
If the non-operating income of Bithumb came from its bitcoin investment, which is most likely the case, Bithumb will see a loss in 2018, if bitcoin fails to recovery beyond the $19,000 mark. The 2017 earnings of Bithumb included bitcoin’s price spike to $19,000, which hit $24,000 in South Korea due to local premiums.