Bitcoin price affects Coinbase stock price

In an interview with Yahoo Finance, Owen Lau, a senior analyst at U.S. investment bank Oppenheimer, mentioned “three factors influencing Coinbase’s stock price.”

In the discussion, he expressed the belief that Bitcoin spot ETFs will bring profits to major US crypto asset (virtual currency) exchange Coinbase in the long term.

“This bitcoin ETF can bring in new investors,” Oppenheimer & Co. Inc. analyst Owen Lau says. “To me, I think it’s a net positive for Coinbase longer-term…” pic.twitter.com/9GtRe6JLIM

— Yahoo Finance (@YahooFinance) January 23, 2024

Mr. Lau pointed out that after the approval of a Bitcoin spot ETF, a situation of “buying on rumors and selling on facts (sell-the-fact)” occurred, causing the price of Bitcoin to decline. He also noted that Bitcoin price is now an important factor in Coinbase’s stock price (NASDAQ: COIN), so volatility is inevitable in the short term.

He also added that the lawsuit with the US Securities and Exchange Commission (SEC) and the overall health of the crypto industry will also be important factors when evaluating Coinbase.

Coinbase’s stock price rose a whopping 400% last year as enthusiasm grew over the U.S. Securities and Exchange Commission’s (SEC) approval of a Bitcoin spot ETF. However, after hitting its all-time high on December 28 last year, it fell by about 30% in a month.

Some analysts, including JP Morgan and Mizuho, ​​say that the environment will be tough for exchanges in the future, with Bitcoin ETFs taking market share from exchanges, and their outlook for Coinbase’s stock price is equivalent to a “sell.” It has been rated as such.

Meanwhile, Oppenheimer set a price target for Coinbase at $160 on the 26th. The stock’s rating has been changed to “outperform,” meaning that returns are expected to exceed the stock price index.

bullish on coinbase

Mr. Lau cited the following two positive aspects that the introduction of a Bitcoin spot ETF will bring to Coinbase.

• Increase in Bitcoin price = Increase in Coinbase’s revenue
• Attracting new investors = supporting price and trading volume increases

Responding to concerns that users might turn to Bitcoin ETFs, which have lower fees, instead of trading physical Bitcoin on Coinbase’s platform, he said, “Certainly some investors, especially institutional investors, are likely to switch to ETFs.”

However, Bitcoin ETF is just one use case, and since Coinbase offers services such as decentralized finance (DeFi) and Web3, many users will likely stay with Coinbase. .

He believes lower U.S. interest rates, Bitcoin’s halving, and greater adoption of cryptocurrencies will help Coinbase boost sales and profits over the next two years.

In addition, 8 out of 11 listed Bitcoin ETFs have been appointed as custodians, and it is said that they are likely to benefit from the Bitcoin ETF by monetizing Bitcoin storage and management fees. .

Business diversification

Lau also notes that Coinbase generates revenue from businesses other than crypto trading, as in the case of Custodian.

He noted that at the end of the third quarter, about 50% of Coinbase’s revenue came from non-trading businesses, such as interest income from the stablecoin USDC. He also praised Coinbase’s efforts to diversify its business, including into staking and custody businesses.

Financially, it will benefit from “new investors, increased recruitment and trading volumes, and increased custodial fees,” while non-financially, it will “serve as a critical infrastructure for the crypto ecosystem.”

SEC litigation

Another thing that has a big impact on stock prices is the lawsuit with the US SEC (Securities and Exchange Commission). Regulation of crypto assets (virtual currencies) in the United States is creating strong uncertainty for related companies.

On this point, Mr. Lau apparently came to the conclusion that “Coinbase has a high chance of winning” after actually observing a hearing regarding a request to dismiss the lawsuit held in the U.S. District Court for the Southern District of New York.

In an investment letter to Oppenheimer clients, he argued that Coinbase is “stronger than many realize and its management team is tougher than most investors give it credit for.”

connection:Bloomberg Senior Litigation Analyst: “Coinbase has the upper hand in lawsuit against SEC, 70% chance of success”

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