Coinbase Price Tumbles After JPMorgan Downgrades Stock On Bitcoin ETF Disappointment

Updated: 24 January 2024

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The Coinbase (COIN) price dropped 4.1% to $122.90 during premarket trading after JPMorgan downgraded the crypto exchange to underweight in a research report on Monday, citing likely disappointment among investors after the launch of spot Bitcoin ETFs (exchange-traded funds) in the US.

“While we continue to see Coinbase as the dominant U.S. exchange in the crypto ecosystem and a leader in cryptocurrency trading and investing globally, we think the catalyst in Bitcoin ETFs that pushed the ecosystem out of its winter will disappoint market participants,” analysts led by Kenneth Worthington wrote.

Coinbase Shares At The Mercy Of Waning Spot Bitcoin ETF Interest

Many investors anticipated the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) would usher the crypto space into a new bullish era. Through these instruments, institutional funds can flow into the digital asset space, allowing investors who were previously prohibited from owning digital assets to gain exposure to the leading cryptocurrency without having to own the underlying asset themselves.

JP Morgan downgraded Coinbase to underweight and said a fair valuation for $COIN is $80 per share. That would be a drop of more than 35% from its current level. pic.twitter.com/eIqAW3XIme

— Barchart (@Barchart) January 23, 2024

Although the introduction of mainstream funding could lead to a significant boost in crypto prices, JPMorgan warned that “any disappointment with ETF fund flows could deflate the enthusiasm that has driven the cryptocurrency rally.” The Wall Street giant also noted that the Bitcoin price is currently under pressure, having already slipped below $40K.

It added that there’s potential for the “cryptocurrency ETF enthusiasm to further deflate.” Should this happen, the bank predicts that it will drive token prices down and lead to reduced trading volumes, which will in turn “lower ancillary revenue opportunities” for firms such as Coinbase.

As a result, the bank believes that 2024 could be a challenging year for the crypto exchange despite its progress in a number of important initiatives, and maintained a target price for COIN at $80 over 12 months that anticipates a 35% decline. COIN is already down about 21% so far this year.

The report also said that Coinbase is expected to hold custodian, surveillance and trading roles for spot Ether ETFs if approved in the US.