JPMorgan Shifts Coinbase Stock Rating to ‘Underweight’ Post Spot Bitcoin ETF Approvals

In the aftermath of the approval of spot Bitcoin ETFs, JPMorgan analysts have downgraded the stock of cryptocurrency exchange Coinbase to an “underweight” status. The downgrade is attributed to the declining price of Bitcoin and the listing of shares of spot BTC exchange-traded funds.

In a communication to investors on January 22, JPMorgan analysts expressed scepticism about the performance of Coinbase stock (COIN), predicting it would not fare well. Nasdaq data revealed that COINs price had experienced a more than 29% decrease in the past 30 days, settling at $121.65 at the time of reporting.

JPMorgan acknowledged Coinbases dominant position in the U.S. crypto ecosystem and its global leadership in cryptocurrency trading. However, the investment bank anticipated disappointment among market participants due to the impact of Bitcoin ETFs on the overall crypto market. With cryptocurrency prices already facing downward pressure, especially with Bitcoin dipping below $40,000, JPMorgan expects enthusiasm for cryptocurrency ETFs to wane further. This could result in lower token prices, reduced trading volume, and diminished ancillary revenue opportunities for companies like Coinbase.

While initially assigning a “neutral” rating to COIN, JPMorgan now foresees a price target of $80 by December 2024. The bank believes that the listing of multiple spot Bitcoin ETFs could serve as a critical catalyst for the crypto industry, potentially overestimating value and influencing stock prices.

The United States Securities and Exchange Commission (SEC) granted official approval for several spot BTC ETFs on January 10, causing unexpected market volatility after hackers spread a false tweet about the SECs green light for these investment vehicles.

JPMorgan contends that the crypto industry set excessively high expectations for the ETF launches, and the actual outcomes are falling short of those lofty projections. Since reaching a 30-day high above $49,000 on January 11, the price of Bitcoin has dropped over 20%, settling at $38,796 at the time of this article. This marks the first instance in 2024 where the crypto assets price fell below $40,000.

Bloomberg ETF analyst James Seyffart reported on January 23 that spot BTC ETFs experienced approximately $76 million in net outflows on their seventh day of trading, with outflows intensifying instead of slowing down. Seyffart also highlighted that ten SEC-approved funds had amassed a combined volume of $10 billion within the initial three days of trading.