Shares of Coinbase Global Inc. rallied Thursday after the much-anticipated regulatory approval of the spot bitcoin ETFs, but some analysts warn investors that the approval is actually bad news for the cryptocurrency exchange.
“We think the approval of the bitcoin ETFs are potentially a lose/lose situation for Coinbase as we see a bitcoin ETF, if particularly successful, as a competitor to Coinbase,” J.P. Morgan analyst Kenneth Worthington wrote in a note to clients.
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Worthington said there are some positives, as he sees Coinbase as the custodian of choice for the bitcoin ETFs, but the negatives will likely be “more relevant for shareholders” given the stock’s recent spike.
Coinbase’s stock
COIN,
jumped 4.8% in morning trading. It has fallen 8.8% so far this year, but that’s after it rocketed 125.5% the previous two months as expectations of a bitcoin ETF approval fueled a rally in cryptocurrency markets.
Bitcoin
BTCUSD,
hiked up 5.2%, putting it on track for the highest close since December 2021.
Mizuho analyst Dan Dolev reiterated the underperform rating he’s had on Coinbase’s stock for the past 13 months. His $54 stock price target implies about 66% downside from current levels.
Dolev said he believes the potential upside to Coinbase’s revenue from a bitcoin ETF “may be more muted than thought,” as it could provide just a 1%-to-2% benefit from custody fees and a 5%-to-10% total benefit if the ETF boosts trading volume.
In a note titled, “Bitcoin ETF approval: a Pyrrhic victory for COIN,” Dolev wrote that “deeper cannibalization of high-margin spot bitcoin trading and/or share loss to brokers other ETF could offset future benefits.”
See the U.S. Securities and Exchange’s filing approving the bitcoin ETFs.
Not all analysts were so bearish, however, as Wedbush’s Moshe Katri reiterated the outperform rating he’s had on Coinbase’s stock for at least nearly two years, citing the “dominant role” the company has as issuer or custodian of all bitcoin ETFs. He boosted his stock price target to $180 from $110, with the new target implying more than 13% upside from current levels.
“With less than 10% of hedge funds investing in crypto assets, we believe the SEC’s ETF approvals will likely expand institutional involvement in the sector,” Katri wrote.
