JPMorgan downgrades Coinbase, calls Bitcoin ETF 'disappointing'

Author: Katherine Ross, Blockworks; Compiler: Songxue, Golden Finance

JPMorgan analysts downgraded Coinbase to underweight on Tuesday.

The stock was previously neutral. Analysts said that while they view Coinbase as "the dominant U.S. exchange in the crypto ecosystem," they are worried that the catalyst that pushed Bitcoin to its highest level in nearly two years won't last.

“Bitcoin ETF catalysts push ecosystem out of winter, which will disappoint market participants.”

Grayscale’s Bitcoin ETF alone is There were $2.2 billion in outflows, and multiple media outlets reported that the FTX asset sale of GBTC resulted in a total value of nearly $1 billion.

However, the downgrade does not affect the $80 price target. Coinbase (COIN) is currently trading at around $122 at the time of publication. The stock was up nearly 129% last year, but fell 28% last month alone.

The price target now reflects the analyst's view of the stock's "normalized earnings," rather than the "previous discounted cash flow approach." Analysts have changed their approach due to the overall cryptocurrency market capitalization. This approach allowed them to compare Coinbase’s trading volume to the industry’s market capitalization.

This is not the first time analysts have expressed concerns about Bitcoin ETFs.

“We compared the Bitcoin ETF to the gold ETF GLD, which was launched to similar market enthusiasm in 2004. Despite the enthusiasm, GLD’s first performance after launch was It raised $3.5 billion in 2018."

Analysts led by Kenneth Worthington found the net flow of $1.2 billion in the first week to be "disappointing."

They further noted thatGrayscale outflows have now pushed overall net sales below GLD.

In addition to Bitcoin ETFs, the court battle between the U.S. Securities and Exchange Commission and Coinbase also poses some potential risks, although analysts do not believe these risks will affect the market in the short term. operations.

However, if Coinbase does not obtain the motion to dismiss, it may face a longer legal path against the SEC, which would also increase the risk that the SEC will prevail and force Coinbase to stop providing services such as wallets or staking.

The U.S. Securities and Exchange Commission claimed that both services violated securities laws. Coinbase and the SEC participated in a hearing last week where they presented arguments for and against the motion to dismiss.

It’s not all bad news for Coinbase, with analysts noting that the exchange is the beneficiary of “larger revenue opportunities” and may even see “higher trading commission potential ” and ecosystem engagement.

In addition to its focus on Bitcoin ETFs, JPMorgan noted that Ethereum staking is increasing, which could benefit the stock.

"We believe Coinbase's profitability has risen significantly, driven primarily by Bitcoin ETF news, which has supported digital asset levels elsewhere," they wrote.