JPMorgan Chase & Co. predicts that the fading hype around Bitcoin exchange-traded funds (ETFs) could negatively affect Coinbase Global Inc., the largest US cryptocurrency exchange. In a note on Monday, analysts led by Kenneth Worthington downgraded Coinbase from neutral to underweight, expressing concerns about the catalyst in Bitcoin ETFs and its potential to disappoint market participants.
Following the downgrade, Coinbase’s shares experienced a 3.1% drop on Tuesday, marking JPMorgan’s first sell-equivalent rating on the stock since initiating coverage in May 2021. Despite ending 2023 with nearly a 400% gain, parallel to Bitcoin’s surge, the recent approval of spot Bitcoin ETFs by the US financial regulator has raised questions about the sustainability of stellar gains for crypto-related stocks.
Year-to-date, Coinbase shares have declined by 29%, while Bitcoin has experienced a 6.8% decrease, trading below $40,000. JPMorgan analysts anticipate a potential deflation in cryptocurrency ETF enthusiasm, leading to lower token prices, decreased trading volume, and diminished ancillary revenue opportunities for companies like Coinbase.
Kenneth Worthington maintained a price target of $80 on Coinbase shares, forecasting a 38% drop over the next 12 months from Monday’s closing price. Bearish sentiment is growing for Coinbase, with 12 sell ratings, eight buys, and eight holds, according to data compiled by Bloomberg. CFRA also downgraded its recommendation to sell last week, citing concerns over increasing competition.
