Coinbase Stock “Uninvestable” In Near Term Amid Legal, Regulatory Threats And May Plunge 50%, Berenberg Capital Says

Updated: 18 October 2023

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Coinbase (COIN) is ”uninvestable” in the near term because of legal and regulatory challenges and its stock may plunge as much as 50%, Berenberg Capital Markets said.

The firm sees Nasdaq-listed Coinbase falling to as low as $39 from a close of $77.46 yesterday amid turbulence from a lawsuit and regulatory scrutiny that it is facing in the US, lead analyst Mark Palmer said in an Oct. 17 note.

“The primary driver of our cautious stance toward Coinbase Global (COIN) is not our concern about the company’s operating performance,” he said. “But rather the threats to its business from the various regulatory actions and litigation it faces in the US, as well as other obstacles it could face in the future as the regulatory crackdown on crypto continues.”

The Securities and Exchange Commission (SEC) charged Coinbase in June with offering unregistered securities.

Palmer’s bearish outlook for Coinbase is further supported by its performance so far this year. It’s surged more than 130%, outperforming Bitcoin (+72%), and the 30% rise in the Nasdaq Composite index.

Coinbase (COIN) Up 130% So Far This Year

(Source: TradingView)

The US’s biggest crypto exchange’s lobbying efforts at home may also face stiff political headwinds as a result of a strong media focus on militant group Hamas’s use of cryptocurrencies for fundraising ahead of its recent attack on Israel, Palmer said.

Over the past few years, Coinbase has upped its lobbying efforts in the U.S. as part of its strategy to push for greater clarity over regulation of the crypto industry, and also to push back against the SEC’s regulation-by-enforcement strategy against the industry.

Hamas Militants Using Cryptocurrency To Raise Funds

The Israeli authorities have shut down more than 100 crypto accounts linked to Hamas on Binance and other crypto exchanges since its attack on the nation.

Among designated terrorist groups, Hamas has been among the most prolific users of crypto, receiving millions of dollars alongside other Palestinian militant groups, research firm Elliptic wrote in an Oct. 11 note

Berenberg Still Has ”Hold” Call On Coinbase

Despite its gloomy outlook for the stock Berenberg reiterated a “hold” recommendation for COIN. And Palmer advised against shorting the stock because it ”is a crowded short.”

“The stock is uninvestable in the near term but could experience abrupt upside moves as it fights through its legal challenges with the SEC,” he said.

While Coinbase’s trading volumes have fallen amid the “crypto winter,” Palmer raised his estimate for the firm’s consumer traction revenue to $240.8 million from an earlier $210 million.