Piper Sandler analyst Patrick Moley has downgraded Coinbase due to ongoing legal battles with the Securities and Exchange Commission (SEC) and continued uncertainty over cryptocurrency regulation in the US, according to BNN Bloomberg.
On July 5, Moley said that regulatory uncertainties have made it too challenging to cautiously predict Coinbase’s future earnings, changing its rating from “neutral” to “overweight.”
Moley’s recommendation for the largest crypto exchange in the US has been revised from overweight to neutral. He expects quarterly trading volumes and monthly user totals for the second quarter to be at their lowest levels in more than two years. Bloomberg reported that Moley noted:
“Rising crypto prices have not translated into 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 opportunities for Coinbase to become a substantial player in the crypto industry, provided regulatory clarity can be achieved.
In June, Moody’s also downgraded Coinbase from “stable” to “negative,” while commenting on its “healthy liquidity position.” Moody’s stated,
“The confirmation of Coinbase’s ratings reflects its healthy liquidity position, recent improvements in cash flow generation as a result of prudent cost management, and because the SEC’s charges only cover some of Coinbase’s products and exclude the major products traded. .”
In addition, if CryptoSlate previously reported, Coinbase’s market share has been steadily rising despite the SEC’s lawsuit. This increase in market dominance, which peaked at 64% in June, coincided with SEC indictments for alleged violations of federal securities laws.
While the SEC lawsuits have raised concerns, this has not stopped traditional financial institutions from partnering with Coinbase. Major players such as BlackRock, Fidelity, and ARK Investments have chosen Coinbase as their oversight sharing partner for submitting spot Bitcoin exchange-traded fund (ETF) applications.
Even as uncertainty reigns over Coinbase’s future earnings, the resubmission of several spot Bitcoin ETF filings clearly intent on entering a supervisory sharing deal with Coinbase reflects continued confidence in the cryptocurrency -exchange.
BNN Bloomberg noted that,
“Of the analysts followed by Bloomberg, 11 recommend buying Coinbase stock, while 13 consider it a hold and eight say sell.”
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