JPMorgan downgrades Coinbase stock to ‘underweight’ following spot Bitcoin ETF approvals

Analysts for JPMorgan downgraded cryptocurrency exchange Coinbase’s stock to an “underweight” rating, citing the falling price of Bitcoin (BTC) and listing shares of spot BTC exchange-traded funds.

In a Jan. 22 note to investors, JPMorgan analysts suggested the price of Coinbase stock under the ticker COIN would not perform well. Data from Nasdaq showed the COIN price had fallen more than 29% in the last 30 days, reaching $121.65 at the time of publication.

“While we continue to see Coinbase as the dominant U.S. exchange in the cryptoecosystem and a leader in cryptocurrency trading and investing globally, we think the catalyst in Bitcoin ETFs that has pushed the ecosystem out of its winter will disappoint market participants,” said JPMorgan. “Cryptocurrency prices are already under pressure; with Bitcoin falling below $40k as of the writing of this note, we see greater potential for cryptocurrency ETF enthusiasm to further deflate, driving with it lower token prices, lower trading volume, and lower ancillary revenue opportunities for firms like Coinbase.”

The investment bank had previously categorized COIN as a “neutral” rating but predicted a price target of $80 by December 2024. According to JPMorgan, listing multiple spot Bitcoin ETFs could be a “key catalyst” for the crypto industry, overestimating value and potentially affecting stock prices.

“[W]e find spot Bitcoin ETFs flows-to date as underwhelming versus the lofty expectations many in the crypto industry had established in the run up to the approval.”

The United States Securities and Exchange Commission (SEC) officially approved listing several spot BTC ETFs on Jan. 10, just one day after hackers sent out a fake tweet announcing the commission had given the green light to the investment vehicles. The uncertainty caused sudden volatility in the crypto markets.

“We think much of the crypto-industry set a high bar for the ETF launches, and, while meaningful, we think expectations are simply too high and unrealistic,” said JPMorgan.

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Since briefing touching a 30-day high price of more than $49,000 on Jan. 11, the price of Bitcoin has fallen more than 20% to reach $38,796 at the time of publication. The drop marked the first time the crypto asset price had fallen under $40,000 in 2024.

Bloomberg ETF analyst James Seyffart reported on Jan. 23 that spot BTC ETFs saw roughly $76 million in net outflows on their seventh day of trading, with outflows “picking up” rather than slowing. He reported ten of the funds approved by the SEC had reached $10 billion in combined volume in the first three days of trading.

Related: Coinbase fights SEC in court, SBF’s parents seek lawsuit dismissal, and Bitcoin ETFs: Hodler’s Digest, Jan. 14-20