JPMorgan Analysts Downgrade Coinbase Shares to Underweight, Citing Impact of Spot Bitcoin ETFs

JPMorgan analysts have downgraded Coinbase shares from Neutral to Underweight, causing a 5% drop in the stock’s value during premarket trading on Tuesday.

The analysts have also established a price target of $80 per share, indicating a significant downside risk of over 37% from the current share price.

The decision to downgrade Coinbase stems from concerns about the company’s prospects in 2024 and skepticism regarding the potential impact of recently approved Bitcoin exchange-traded funds (ETFs), according to a CNBC report. 

The downgrade by JPMorgan comes at a time when market participants are evaluating the effects of the newly launched Bitcoin ETFs on the overall cryptocurrency ecosystem.

Analysts at JPMorgan worry that the anticipated catalyst provided by the Bitcoin ETFs may disappoint market participants, potentially deflating enthusiasm for cryptocurrencies even further.

“Cryptocurrency prices are already under pressure; with Bitcoin falling below $40k as of the writing of this note, we see greater potential for cryptocurrency ETF enthusiasm to further deflate.”

The waning enthusiasm surrounding cryptocurrencies is expected to have a negative impact on token prices, trading volume, and ancillary revenue opportunities for companies like Coinbase.

Despite the impressive performance of Coinbase’s stock in 2023, outperforming the broader US stock market, JPMorgan analyst Kenneth B. Worthington predicts a more challenging year for the cryptocurrency exchange in 2024.

Worthington acknowledges Coinbase’s progress in various initiatives, such as the development of derivatives and the Layer-2 Base, but still anticipates difficulties ahead.

JPMorgan analysts value Coinbase stock at $80 per share based on normalized earnings power, suggesting a downside of 35% for the shares.

Coinbase Expands Global Presence Despite Regulatory Hurdles

Coinbase has been actively expanding its global presence.

Back in September, the exchange revealed that it secured an Anti-Money Laundering (AML) compliance registration from the Bank of Spain, making it a registered crypto exchange in the country.

The registration with the Bank of Spain allows Coinbase to offer its full suite of products and services to both retail and institutional users in Spain while ensuring compliance with the country’s legal framework.

Over the past year, Coinbase has obtained Virtual Asset Service Provider (VASP) registrations in several European countries, including Italy, Ireland, and the Netherlands.

It has also received in-principle approval and launched its services in Singapore, Brazil, and Canada.

The company’s push for global expansion comes amid growing regulatory hostility in the US.

Back in June, the SEC sued Coinbase for selling unregistered securities and a number of other alleged wrongdoings.

However, despite Coinbase’s efforts to expand its services, such as launching an international exchange for crypto derivatives to attract non-US institutional investors and introducing Base, a layer-2 blockchain designed to scale the user base, JPMorgan analysts remain cautious about the company’s future performance.