JPMorgan Raises Concerns About Bitcoin ETFs: Coinbase Experiences 38% Downgrade Alert
Coinbase Faces Downgrade by JPMorgan Due to Slower Adoption of Bitcoin ETFs
In a surprising turn of events, JPMorgan Chase & Co. has downgraded Coinbase Global Inc., citing concerns about the readiness of the U.S. market for spot Bitcoin exchange-traded funds (ETFs). This move has sparked a debate about whether the U.S. was truly unprepared for such a significant financial instrument.
JPMorgan, a prominent financial institution, has changed its stance on Coinbase, shifting from a ‘neutral’ to an ‘underweight’ rating. Despite Coinbase’s impressive profits in the previous year, the bank anticipates challenges in 2024. Kenneth Worthington, the lead analyst at JPMorgan, also points out potential obstacles for the popular cryptocurrency exchange.
“While we still see Coinbase as the dominant U.S. exchange in the crypto ecosystem and a global leader in cryptocurrency trading and investing, we believe that the introduction of bitcoin ETFs, which revitalized the ecosystem, will disappoint market participants,” says Worthington.
Looking ahead, JPMorgan maintains a price target of $80 for Coinbase stock, indicating a projected 38% drop over the next 12 months. This downgrade marks a significant departure from the bank’s more optimistic coverage initiated in May 2021. As a result of this development, Coinbase shares experienced a 4.1% decline, settling at $122.90 in pre-market trading.
The approval of spot Bitcoin ETFs by the Securities and Exchange Commission (SEC), which was initially expected to attract mainstream investment, now raises concerns within JPMorgan. The bank fears that any disappointment in ETF fund flows could trigger a decline in overall market sentiment. Worthington highlights the potential consequences in a report, stating that it could lead to “lower token prices, lower trading volume, and reduced ancillary revenue” opportunities for platforms like Coinbase.
However, not everyone shares JPMorgan’s bearish sentiment. Investment firm Wedbush takes a more optimistic view, suggesting that Coinbase is likely to benefit from the SEC’s approval of spot Bitcoin ETFs.
In conclusion, JPMorgan’s downgrade of Coinbase reflects its concerns about the U.S. market’s readiness for Bitcoin ETFs. While some believe this could have a negative impact on Coinbase’s revenue and stock price, others remain optimistic about the potential benefits of ETF approval. Only time will tell how this story unfolds for Coinbase and the broader cryptocurrency market.