J.P. Morgan downgrades Coinbase rating, concerned ETF disappointment may ensue, target price $80

According to a report from CoinDesk, JPMorgan indicated in their research report this week that the main catalyst for the cryptocurrency market last year, the launch of a Bitcoin spot ETF, could reverse and disappoint investors in 2024. They downgraded the rating of the exchange Coinbase and set a target price of $80.

JPMorgan Downgrades Coinbase Rating, Concerned ETFs Will Disappoint Investors

JPMorgan has downgraded Coinbase's rating from neutral to underweight with a target price of $80. Despite Coinbase's 390% surge last year and advancements in many key areas, 2024 may pose more challenges.

The report stated:

While we still view Coinbase as the dominant U.S. exchange in the cryptocurrency ecosystem and a global leader in cryptocurrency trading and investment, we believe the catalyst of Bitcoin ETFs to drive the ecosystem out of its winter could disappoint market participants.

JPMorgan is concerned that "any disappointment in ETF fund flows could potentially dampen enthusiasm driving cryptocurrency price appreciation."

Coinbase Stock Performance

Since hitting a low of $31 early last year, Coinbase's stock price has been on the rise, reaching a high of $187 in December. However, following the launch of Bitcoin spot ETFs and the subsequent "sell the news" drop in Bitcoin, the stock has been declining, dropping 3.14% yesterday to close at $124.19. It has fallen 28% year-to-date but is still far from JPMorgan's target price of $80.

During its upward trajectory, ARK Invest's flagship fund ARKK has been continuously selling off Coinbase stocks for rebalancing purposes.

The Art of Rebalancing: Ark Invest Continues to Sell Coinbase and Buy Block

Will Bitcoin Spot ETFs Bring Stable Revenue to Coinbase?

In its previous third-quarter earnings report, Coinbase saw a decline in cryptocurrency trading volume to $76 billion due to the overall downturn in the cryptocurrency market, leading to a decrease in trading-related revenue to $290 million. However, with effective cost control, the net loss is gradually narrowing, and Coinbase has stated that it expects to generate meaningful adjusted earnings by 2023!

Coinbase plays a crucial custodial role in Bitcoin spot ETFs, and with the official listing of Bitcoin spot ETFs and Ethereum spot ETFs awaiting SEC approval, it is expected to bring in a significant source of stable revenue. However, the exact figures remain to be seen in Coinbase's first-quarter earnings for this year. For an exchange still in a loss-making position, the value of its stock will depend on investors' expectations of its future profitability!