Coinbase (COIN) shares fell 4.1% to $122.90 in pre-market trading on Monday after JPMorgan downgraded the cryptocurrency exchange to "underweight" in a research report, citing the potential disappointment of investors after the launch of a spot Bitcoin ETF (exchange-traded fund) in the United States as the main reason.
“While we continue to view Coinbase as the dominant U.S. exchange in the crypto ecosystem and a global leader in cryptocurrency trading and investing, we believe the catalyst for a bitcoin ETF to lift the ecosystem out of the winter will disappoint market participants,” wrote analysts led by Kenneth Worthington.
Coinbase Shares Affected by Dwindling Interest in Spot Bitcoin ETFs
Many investors expect the U.S. Securities and Exchange Commission’s (SEC) approval of a spot Bitcoin ETF to usher in a new bullish period for the cryptocurrency space. Through these vehicles, institutional money can flow into the digital asset space, allowing investors who were previously prohibited from holding digital assets to gain exposure to the leading cryptocurrency without having to own the underlying asset.
JPMorgan Chase downgraded Coinbase's rating to "underweight", saying that $80 per share is a fair valuation. This would cause its stock price to fall by more than 35%.
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While the introduction of mainstream money could lead to a sharp rise in cryptocurrency prices, JPMorgan warned that "any disappointment with ETF flows could dampen the enthusiasm driving cryptocurrencies higher." The Wall Street giant also noted that Bitcoin prices are currently under pressure and have fallen below $40,000.
The report also stated that if approved in the United States, Coinbase is expected to take on the custody, monitoring and trading roles for the spot Ethereum ETF.
Therefore, despite Coinbase's progress in some important initiatives, JPMorgan believes that 2024 may be a challenging year for the cryptocurrency exchange and sets a target price of $80 for COIN, which is expected to fall by 35%. So far this year, COIN has fallen by about 21%.
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