JPMorgan Downgrades Coinbase Stock Due to Declining Bitcoin Value and Overestimated ETF Impact
Summary:
JPMorgan analysts have downgraded Coinbase's stock from "neutral" to "underweight" due to the declining value of Bitcoin and the launching of spot Bitcoin exchange-traded funds. The bank expects the cryptocurrency market's enthusiasm for Bitcoin ETFs to further decrease, dragging down token prices, trading volume, and revenue opportunities for companies like Coinbase. Despite acknowledging Coinbase's leadership in the crypto market, JPMorgan anticipates a price target of $80 for Coinbase's stock by December 2024. The analysts also note the crypto industry might overestimate the value of multiple Bitcoin ETFs, which could affect stock prices. They deem the high expectations around ETF launches as unrealistic.
JPMorgan's team of market analysts has assigned cryptocurrency exchange Coinbase's stock, labelled as "COIN", an "underweight" rating due to the diminishing value of Bitcoin and launching shares of spot Bitcoin exchange-traded funds. It was warned in a report to investors dated January 22 that the shares of Coinbase, marked with the ticker COIN, could underperform. According to Nasdaq, the value of COIN has plunged over 29% in the previous month, settling at $121.65 at the point of reporting.
JPMorgan reiterated its belief in Coinbase's strong position as America's leading crypto exchange and a global forerunner in the field of crypto trading and investment. However, the bank expressed concerns that the recent surge in Bitcoin ETFs, a catalyst that has revived the crypto industry, might disappoint investors. With cryptocurrency values, particularly Bitcoin, currently faltering (Bitcoin dropped below the $40k mark at the time of the research report), JPMorgan anticipates that waning excitement about crypto ETFs could further depress cryptocurrency prices. Such a scenario would result in decreased token prices, trading volumes, and other revenue-generating possibilities for businesses such as Coinbase.
Previously classified as "neutral" by the investment banking firm, it now estimates COIN to hit a price target of $80 by December 2024. As per JPMorgan, the crypto sector might overstate the significance and eventually impact stock prices with the introduction of multiple Bitcoin spot ETFs.
Following the official authorization of several Bitcoin spot ETFs by the US Securities and Exchange Commission (SEC) on January 10, mistaken tweets claiming that the commission had approved investment vehicles caused immediate fluctuations in the crypto market.
JPMorgan suggests that unrealistic and excessively high expectations were set for the ETF launches by much of the crypto sector. Bitcoin's value, after peaking at a 30-day high of over $49,000 on January 11, has since slumped more than 20% to stand at $38,796 as of report time. For the first time in 2024, the price of the digital commodity dipped below the $40,000 threshold. James Seyffart, an ETF analyst at Bloomberg, noted on January 23 that spot Bitcoin ETFs witnessed approximately $76 million in net outflows on their seventh trading day, with the trend accelerating rather than slowing down. He documented that the first three trading days amassed a combined volume of $10 billion across the ten funds sanctioned by the SEC.
Published At
1/23/2024 6:21:12 PM
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