JPMorgan Sounds Alarm on Bitcoin ETFs: Coinbase Faces 38% Downgrade

In a surprising move, JPMorgan Chase & Co. has downgraded Coinbase Global Inc., expressing reservations about the U.S. market’s readiness for the recently approved spot Bitcoin exchange-traded funds (ETFs).

Was the USA really not ready for such a massive financial instrument? Let’s dig in deep to understand this hot new take.

Markets at a Crossroads

JPMorgan, a financial powerhouse, has shifted its stance on Coinbase, moving from a ‘neutral’ to an ‘underweight’ rating. Despite Coinbase’s impressive profits in the previous year, the bank foresees challenges in 2024, and its lead analyst, Kenneth Worthington, also points to potential headwinds for the popular cryptocurrency exchange.

“While we continue to see Coinbase as the dominant U.S. exchange in the crypto ecosystem and a leader in cryptocurrency trading and investing globally, we think the catalyst in bitcoin ETFs that pushed the ecosystem out of its winter will disappoint market participants.” 

Kenneth Worthington

A Bleak Forecast

Keeping an eye on the horizon, JPMorgan maintains a price target of $80 on Coinbase stock, signaling a projected 38% drop over the next 12 months. This downgrade is a notable departure from the bank’s more optimistic coverage initiated in May 2021. Following this development, Coinbase shares experienced a 4.1% dip, settling at $122.90 in pre-market trading.

Read More: Coinbase vs. SEC: Is Dismissal on the Cards? Here’s What To Expect

A Threat to the Market at Large?!

The Securities and Exchange Commission’s (SEC) approval, initially anticipated to attract mainstream investment, now raises concerns within the bank. JPMorgan fears that any disappointment in ETF fund flows could trigger a decline in overall market sentiment. In a Monday report, Worthington notes the possible consequences: “lower token prices, lower trading volume, and lower ancillary revenue” opportunities for platforms like Coinbase.

…but others differ

Despite JPMorgan’s bearish sentiment, investment firm Wedbush takes a more optimistic view. Wedbush’s recent report from January 11 suggests that Coinbase is most likely to benefit from the SEC’s approval of spot Bitcoin ETFs. 

Read More: Weekly Spot Bitcoin ETF Report: Insights After Its First Trading Week