Shares of Coinbase Global Inc. saw a significant surge on Thursday after the highly anticipated regulatory approval of spot bitcoin ETFs. However, some analysts caution that this approval may actually pose challenges for the cryptocurrency exchange.
According to J.P. Morgan analyst Kenneth Worthington, the approval of bitcoin ETFs could potentially create a lose/lose situation for Coinbase, as a successful bitcoin ETF could become a direct competitor. Worthington emphasized that while there are some positives, such as Coinbase being viewed as the custodian of choice for these ETFs, the negative implications will likely be more relevant for shareholders given the recent spike in the company’s stock.
Coinbase’s stock (COIN) experienced a 4.8% jump in morning trading. Although it has declined 8.8% this year, it previously soared 125.5% over the past two months due to expectations of a bitcoin ETF approval that fueled a rally in cryptocurrency markets.
Furthermore, Bitcoin itself showed a 5.2% hike, putting it on track for the highest closing price since December 2021.
Mizuho analyst Dan Dolev maintained his underperform rating on Coinbase’s stock, which he has held for the past 13 months. His stock price target of $54 implies a downside of about 66% from the current levels.
It is important to note that while the approval of bitcoin ETFs may have initially driven Coinbase’s stock rally, analysts stress that there are potential challenges ahead for the cryptocurrency exchange.
Bitcoin ETF Approval and Coinbase’s Revenue Potential
In a recent analysis, Dolev, an industry expert, shared his insights on the potential impact of a bitcoin exchange-traded fund (ETF) approval on Coinbase’s revenue. Contrary to popular belief, Dolev suggests that the upside for Coinbase may be less significant than initially anticipated.
According to Dolev, the main source of revenue for Coinbase from a bitcoin ETF would be through custody fees. However, he predicts that this would only provide a modest 1%-to-2% benefit. Additionally, if the ETF successfully boosts trading volume, the overall benefit for Coinbase could range from 5% to 10%.
While some analysts share Dolev’s cautious outlook, not all experts echo his sentiment. Moshe Katri from Wedbush maintains an optimistic view and reaffirms his “outperform” rating on Coinbase’s stock. He emphasizes the company’s central role as the issuer or custodian of all bitcoin ETFs, which positions Coinbase as a dominant player in the market. Katri even raised his stock price target to $180 from $110, hinting at a potential upside of over 13% from the current levels.
Katri also points out that, currently, less than 10% of hedge funds are investing in crypto assets. With the SEC’s approval of ETFs, institutional involvement in the sector is expected to significantly expand. This could prove to be a game-changer for Coinbase and further drive their growth in the future.
Overall, while Dolev maintains a more conservative outlook regarding the impact of a bitcoin ETF on Coinbase’s revenue, Katri remains confident in the company’s prospects due to its dominant market position and the potential for increased institutional engagement in the crypto sector.
To see the U.S. Securities and Exchange Commission’s filing approving the bitcoin ETFs, refer to the official source.