Cryptocurrency markets are facing a turbulent few days in anticipation and reaction to the Securities and Exchange Commission finally approving trading of 11 new spot Bitcoin ETFs in the United States. These newly launched ETFs are good news for the crypto market. The industry has long been viewed with skepticism by both regulators and institutional investors. ETFs also ease the way retail investors trade cryptocurrencies, allowing them to buy and sell various coins through traditional means they are already familiar with. But while all eyes are on the spot Bitcoin ETF race, other potential winners have emerged, including Coinbase. After soaring nearly 400% in 2023, the cryptocurrency exchange platform's stock price plunged 13% from the beginning of the year through Wednesday, and was swinging between gains and losses on Thursday. Bitcoin rose more than 10%. COIN 1Y Mountain Coinbase 1 Year Stock Price Chart Pluses and Minuses “We see the impact of the Bitcoin ETF as having both positive and risk factors for Coinbase, but considering the rise in Coinbase's stock price, there are risks. are more important to shareholders,” JPMorgan analyst Kenneth Worthington wrote. Worthington added that Coinbase would likely benefit from being selected as the custodian of the new ETF, with eight of the 11 funds already in the role. However, the analyst added that a particularly successful Bitcoin ETF could become a competitor to Coinbase. This can erode platform volumes, redirect potential customers, and ultimately put downward pressure on trading spreads and fees. Wedbush, which has an Outperform rating on Coinbase, raised its price target on the stock by 64%, from $110 to $180. This means Coinbase stock could rise nearly 19% from Wednesday's closing price of $151.29. “COIN’s future performance will depend on the company’s dominant role in these ETFs, the ability of ETFs to drive/unlock increased institutional investment in crypto assets (currently less than 10%), and recent legislation/COIN’s peers (Binance, etc.),” wrote Wedbush analyst Moshe Khatri. In addition to generating revenue from custody and management fees, Khatri said the ETF's approval could potentially bring more retail and institutional clients such as hedge funds to the platform, benefiting Coinbase. We believe that it has the potential to bring about More soon, Wedbush also expects Coinbase to receive a boost from the recent uptick in trading activity. “We also expect P&L tailwinds from the recent December quarter’s crypto asset price volatility (40%) increase, which is in line with Q1 2023 levels and favorably driving the company’s trading volume mix. ,” Khatri wrote. However, Mizuho analyst Dan Dreb believes the approval of a Bitcoin ETF will likely only be a “big win” for Coinbase stock. “Potential upside in COIN returns from Bitcoin ETFs may be more modest than thought. Gains from custody fees are only 1-2%, if the ETF drives additional spot Bitcoin transactions. The total profit is 5-10%,” Dolev wrote. “Furthermore, further cannibalization of high-margin spot Bitcoin trading and equity losses to brokers offering ETFs could offset future gains.” Dreb expects the fundamentals of Coinbase's business to weaken, leading to a “painful reality check” for the stock. Mizuho reiterated its underperform rating on the exchange platform and said its $54 price target corresponds to a 64% downside for the stock. “this [price target] “Although broadly in line with its peers, the expectation of price compression over time makes it a bargain compared to other high-growth fintechs,” Dolev wrote. —CNBC's Michael Bloom contributed to this report.
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