Some crypto investors had high hopes for the approval of Bitcoin spot ETFs. According to one analyst, the new trading structure is also likely to produce losers. The expert has also identified a possible winning stock.
• Analyst: Coinbase price recovery only thanks to crypto recovery
• Disappointing quarterly figures ahead
• Robinhood preferred
The advance praise with which the crypto community showered the introduction of spot ETFs initially led to a “sell-the-news” event following the SEC’s decision. Crypto prices have now recovered again, but according to an expert, the market is unlikely to benefit from the developments on a broad level.
Analyst sees stress factors for Coinbase
Dan Dolev, analyst at Mizuho, identified Coinbase shares as the loser. The average daily spot trading volume on Coinbase has fallen to $1.9 billion since the ETFs were introduced in January, from $2.5 billion in the 30 days before their launch.
This is bad news for Coinbase’s business model, as the trading platform still generates a majority of its revenue from traders. “The big hope for Coinbase in 2024 was that more Bitcoin ETF AUM would lead to increased spot trading,” Street Insider quoted the analyst as saying in a client report. In fact, the industry had high hopes that approval of Bitcoin ETFs would generate large demand and have a positive impact on trading volumes.
Coinbase with increased outflows
Further, Dolev explained that contrary to expectations, “outflows from ETFs where Coinbase is the custodian are exceeding inflows (i.e. -$6 billion outflows from GBTC since January 11th vs. +$4.9 billion- dollar estimated inflows to other seven ETFs that Coinbase holds).”
Given the huge discrepancy between retail trading fees and what Mizuho believes Coinbase earns from ETF custody, additional downward pressure on industry prices is expected due to the introduction of the ETFs. According to Dolev, that moment appears to be getting closer based on recent price changes at Coinbase.
Analyst sees Coinbase still vulnerable
Although there has been a recovery in both the crypto market and Coinbase shares in recent trading days, the Mizuho analyst remains cautious – especially with a view to the company’s upcoming quarterly report on February 15th.
In an interview with CNBC, the declared Coinbase bear emphasized that investors should prepare for a rude awakening. He expects weak sales and a slowdown in user growth. Average market expectations are for revenue of $1.8 billion and a loss per share of $2.62. In his opinion, Coinbase will not be able to do that.
The latest price rally is due to a general market recovery in cryptocurrencies and not to company-specific news about Coinbase. The higher the stock goes, the better the short it becomes, Dolev continued in the interview.
His analysis firm remains bearish on the company’s shares: He sees the price target for Coinbase at $60 by the end of the year. That would be a massive drop of almost 58 percent from the current price level of 140.39 (closing price on February 13, 2024) and is also well below the average price target of market experts, which is $133.20.
Analyst recommends Robinhood
When asked which stock he thinks would be a potential beneficiary if the Coinbase price trend decouples from the price trend of Bitcoin, Doblev explains: “I love Robinhood,” and the stock is probably the best option regardless of whether you are a crypto bull or not. Because the Bitcoin spot ETFs can be traded on Robinhood, but not on Coinbase. Robinhood is the essential trading platform for young people. The analyst also points to the broker’s global availability.
Editorial team finanzen.net
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