Coinbase, a prominent cryptocurrency exchange, has recently drawn significant investor attention following a “buy” rating upgrade for its COIN stock from CITI. This positive outlook from CITI comes ahead of Coinbase’s anticipated Q2 earnings release scheduled for early August.
The upgrade has sparked discussions about the potential reasons behind CITI’s optimism. In this analysis, we delve into the recent upgrade from CITI and explore how this may influence the performance of Coinbase’s stock in the near future.
CITI Upgrades Coinbase Rating Amid Regulatory Changes
CITI has upgraded its rating for Coinbase from “Neutral” to “Buy/High Risk,” citing recent shifts in the U.S. political and legal landscape as key factors. The analysts at CITI believe that these changes could positively influence Coinbase’s regulatory risks. Specifically, the Supreme Court’s decision to overturn the Chevron precedent is seen as a potential benefit for the cryptocurrency industry.
The new report notes that the Chevron ruling could lead to increased judicial scrutiny of the SEC’s regulation-by-enforcement strategy. This legal shift might allow crypto defendants to invoke the Major Questions Doctrine, potentially resulting in a more thorough examination of the SEC’s regulatory practices.
CITI’s analysts suggest that a more favorable regulatory environment could attract institutional capital and boost investment. This could lead to enhanced collaboration between the crypto and traditional financial sectors, which may significantly benefit Coinbase.
However, CITI also highlights potential risks. The current administration’s enforcement approach and the SEC’s stance on staking could pose challenges for Coinbase. Approximately one-third of on-chain tokens rely on staking, yet Ethereum ETF providers are barred from staking rewards. This restriction could impact COIN’s performance, especially given the importance of proof-of-stake tokens like ETH for energy-efficient crypto utilities.
CITI Raises Coinbase Price Target and Highlights Positive Market Catalysts
In its recent report, CITI increased Coinbase’s price target from $260 to $345, reflecting a higher level of confidence in the company’s future. The report notes that the launch of Spot Ethereum ETFs in the U.S. could serve as a positive catalyst for Coinbase, potentially leading to increased adoption of cryptocurrencies and expanded custody revenue opportunities for the exchange.
The introduction of Spot Ethereum ETFs may pave the way for additional crypto ETFs, further boosting market growth. Analysts also pointed out that the risk/reward setup for Coinbase has improved, especially regarding its defense against the SEC’s lawsuit.
Despite this optimistic outlook, COIN’s stock price fell about 1% from its previous close, trading at $263. Year-to-date, the stock has surged by 69% and increased by 25% over the past 30 days. Investors are now awaiting Coinbase’s Q2 FY24 earnings release, scheduled for August 1, after the market close.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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