Coinbase downgraded by analysts amidst regulatory wrangles

Piper Sandler analyst Patrick Moley has downgraded Coinbase due to its ongoing legal tussle with the Securities and Exchange Commission (SEC) and the continuing ambiguity over cryptocurrency regulation in the U.S., according to BNN Bloomberg.

On July 5, Moley expressed that the regulatory uncertainties have made it too challenging to project Coinbase’s future revenues prudently, altering his rating to ‘neutral’ from ‘overweight.’

Moley’s recommendation for the largest crypto exchange in the U.S. has been revised from overweight to neutral. He anticipates that the second quarter’s quarterly trading volumes and monthly transacting user totals will be at the lowest level in over two years. Bloomberg reported that Moley commented,

“Rising crypto prices have not translated to increased trading volumes for Coinbase in recent quarters and the timing of a spot Bitcoin ETF approval is anyone’s guess.”

Despite this, Moley sees potential for Coinbase to be a substantial player in the crypto industry, provided that regulatory clarity can be achieved.

In June, Moody’s also downgraded Coinbase to ‘negative’ from ‘stable’ while commenting on its “healthy liquidity position.” Moody’s stated,

“The affirmation of Coinbase’s ratings reflects its healthy liquidity position, its recent cash flow generation improvements stemming from prudent expense management, and because the SEC’s charges pertain only to some of Coinbase’s products, and exclude its leading traded products.”

Moreover, as CryptoSlate previously reported, Coinbase’s market share has steadily risen, despite the SEC’s lawsuit. This increase in market dominance, peaking at 64% in June, has occurred concurrently with SEC charges against it for alleged violations of federal securities laws.

Although the SEC’s lawsuits have raised concerns, this has not stopped traditional financial institutions from partnering with Coinbase. Key players like BlackRock, Fidelity, and ARK Investments have chosen Coinbase as their surveillance-sharing partner for spot-Bitcoin exchange-traded fund (ETF) filings.

Even as uncertainty looms over Coinbase’s future revenue earnings, the resubmission of several spot Bitcoin ETF applications that clearly state an intention to engage in a surveillance-sharing agreement with Coinbase reflects continuing faith in the cryptocurrency exchange.

BNN Bloomberg noted that,

“Among the analysts tracked by Bloomberg, 11 recommend buying Coinbase stock while 13 rate it a hold and eight say sell.”

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