Shares of Coinbase Global Inc. witnessed a surge last year, largely driven by optimism surrounding the impending launch of spot bitcoin ETFs. However, JPMorgan analyst Kenneth Worthington now expresses concerns that this sentiment may soon reverse.
In a recent note, Worthington downgraded Coinbase's stock from neutral to underweight and voiced his worries about the cryptocurrency market. He stated, "We think the catalyst in Bitcoin ETFs that has pushed the ecosystem out of its winter will disappoint market participants." At the time of writing his note, Bitcoin prices had fallen below $40,000. Worthington and his team anticipate a further deflation of cryptocurrency ETF enthusiasm, leading to lower token prices, reduced trading volume, and diminished ancillary revenue prospects for firms like Coinbase.
While maintaining a $80 price target for Coinbase shares, Worthington acknowledges the potential for over 35% downside and expects this year to be more challenging for the company. This prediction was reflected in the stock's nearly 4% decline during Tuesday's premarket trading.
Worthington casts doubt on the prospect of significant windfalls that the crypto industry had anticipated from the recent launch of bitcoin ETFs. He suggests that these windfalls may be more of a "mirage" or require a longer timeline than initially expected. The net inflows into Bitcoin ETFs in the first week of their launch have fallen short of expectations set by the cryptocurrency community and even lag the initial flows witnessed by the Gold ETF in 2004. The analyst believes that the crypto industry has set unrealistically high expectations for ETF launches.
This downgrade by Worthington brings the number of analysts with bearish ratings on Coinbase to 11 out of 27 tracked by FactSet. There are eight analysts with bullish ratings, while the remaining eight have hold-equivalent ratings. The average price target stands at $126.67, which is close to Monday's closing price of $128.21.
Despite the concerns raised by Worthington, only time will reveal whether the enthusiasm surrounding bitcoin ETFs was indeed exaggerated and whether Coinbase can navigate this potential downturn.
