JPMorgan Classify Stock (COIN) to ‘Underweight’ Rating
The analysts of American investment bank JPMorgan classified the Coinbase stock (COIN) to underweight rating. The latest category portrays a downgrade from the previous neutral rating. Although the analysts downgraded COIN stock, they retained the initial price target of $80 by December.
The JPMorgan analysts explained reasons for downgrading the US’s largest crypto exchange stock as necessitated by the plunge suffered by the Bitcoin price. Besides, the analysts illustrate that the downgrade is tied to the historic decision by the US Securities and Exchange Commission (SEC) to approve spot Bitcoin exchange-traded funds (ETFs) on January 10.
JPMorgan Analysts Lowers Coinbase Stock to Underweight Rating
The JPMorgan analysts conveyed a Monday, January 22 note to the investors suggesting that Coinbase stock trading under the ticker COIN would perform poorly.
Coincidentally, the downgrade of Coinbase stock occurred at a period when Nasdaq data showed COIN price declining by over 29% in the 30-day run to exchange hands at $124.60 by press time.
The JPMorgan analysts acknowledged that Coinbase remains the dominant exchange within the US crypto ecosystem. Besides, Coinbase ranks second largest globally, trailing Binance in trading volume.
The analysts indicate that though Bitcoin ETFs proved the catalyst propelling the ecosystem from the cold winter, they will likely disappoint market participants. The analysts illustrated that cryptocurrency prices are bearing the pressure, pushing Bitcoin below the $40,000 level.
The JPMorgan analysts demonstrate that crypto ETFs portray increased potential and likely enthusiasm to deflate. The deflation will take down with it lower prices for the digital tokens. Lower trading volume will translate to declining opportunities to generate ancillary revenue for crypto firms like Coinbase.
The analysts reflected on the previous classification of COIN when the investment bank labeled Coinbase stock (COIN) as a neutral rating. Also, JPMorgan forecasted the price to be $80 by the end of this year.
The JPMorgan analysts observed that multiple spot Bitcoin ETFs constitute the critical catalyst for the digital assets ecosystem. Listing the 11 spot Bitcoin ETFs would translate to overestimated value, affecting the stock prices.
The analysts noted that sport Bitcoin ETFs have portrayed underwhelming flows to date, contrary to the lofty expectations that the crypto industry exhibited in a hype that dominated the run-up to SEC’s approval.
Bitcoin ETFs Approval Indicates High Expectations as Unrealistic
The US SEC issued a notice of approval on January 10, 24 hours later, after hackers conveyed a fake tweet declaring the Gary Gensler-led Commission had given the nod to the investment vehicles. The resulting uncertainty translated to sudden volatility within the digital assets’ markets.
JPMorgan indicated that the crypto industry fueled the hype in return, setting the high bar for the ETF unveiling. Although meaningful, it yielded too high expectations that now seem unrealistic.
The JPMorgan analysts observe that since the bitcoin price tested a 30-day high of $49,000 on January 11, the price has declined by 20% to test below $38,700. The drop represents the initial time when the digital asset price plunged below $40,000 this year.
Bloomberg ETF lead analyst James Seyffart revealed in a Tuesday, January 23 update that the spot Bitcoin ETFs suffered $76 million in net outflows during their seventh-day trading. The outflows are gaining pace and not slowing.
The sudden turn of events is disappointing for the crypto industry, with ten funds accounting for $10 billion in trading volume by the third day of trading.
Editorial credit: David Esser / Shutterstock.com
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