Coinbase Faces Legal and Regulatory Challenges, Stock Could Plunge 50%
The stock of Coinbase (COIN) is facing significant challenges in the near term, making it “uninvestable,” according to Berenberg Capital Markets. The firm predicts that the Nasdaq-listed cryptocurrency exchange could see its stock price drop as much as 50% to $39 due to ongoing legal and regulatory issues. Coinbase is currently facing a lawsuit and regulatory scrutiny in the US, which has raised concerns about its future prospects.
Regulatory Actions Pose Threats to Coinbase
Berenberg Capital Markets analyst Mark Palmer explains that the main reason for their cautious stance on Coinbase is the potential impact of regulatory actions and litigation on its business. The Securities and Exchange Commission (SEC) charged Coinbase with offering unregistered securities in June. As the regulatory crackdown on cryptocurrencies continues, Palmer believes that Coinbase could face further obstacles in the future.
Coinbase’s Strong Performance This Year
Despite the challenges it faces, Coinbase has performed exceptionally well this year. The company’s stock has surged over 130%, outperforming Bitcoin’s 72% increase and the 30% rise in the Nasdaq Composite index.
Coinbase Increases Lobbying Efforts for Regulatory Clarity
In an effort to advocate for clearer regulations in the crypto industry, Coinbase has ramped up its lobbying efforts in the US. The company aims to push back against the SEC’s regulation-by-enforcement strategy targeting the industry.
Hamas Militants Utilizing Cryptocurrency for Fundraising
The Israeli authorities have taken action against more than 100 crypto accounts associated with Hamas on various exchanges, including Binance. Hamas, along with other Palestinian militant groups, has been using cryptocurrency to raise millions of dollars, according to research firm Elliptic.
Berenberg Maintains “Hold” Recommendation for Coinbase
Despite the negative outlook on Coinbase’s stock, Berenberg reiterates its “hold” recommendation. Palmer advises against shorting the stock due to its crowded short position. He acknowledges that while the stock may be uninvestable in the near term, it could experience sudden upside moves as it navigates through its legal challenges with the SEC.
Coinbase’s Trading Volumes and Revenue Estimate
Although Coinbase has experienced a decline in trading volumes during the “crypto winter,” Palmer has raised his estimate for the company’s consumer traction revenue from $210 million to $240.8 million.
Hot Take: Challenges Ahead for Coinbase Amid Regulatory Scrutiny
As Coinbase faces legal and regulatory challenges in the US, including a lawsuit by the SEC, its stock may suffer significant losses. Berenberg Capital Markets predicts a potential plunge of up to 50% in Coinbase’s stock price. Despite this gloomy outlook, the firm maintains a “hold” recommendation for COIN and advises against shorting the stock due to its crowded short position. Coinbase continues to lobby for regulatory clarity and fights through its legal challenges. While trading volumes have declined, the company’s revenue estimate has been revised upwards. The future remains uncertain for Coinbase as it navigates the evolving regulatory landscape.
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