JPMorgan Sees Challenges Ahead for Crypto Market — Downgrades Coinbase Stock

Warning of a difficult time ahead for the crypto market, global investment bank JPMorgan has downgraded Coinbase stock. Emphasizing that crypto prices are already under pressure, JPMorgan warned of “greater potential for cryptocurrency ETF enthusiasm to further deflate,” driving with it lower crypto prices and trading volume.

JPMorgan’s Crypto Market Outlook, Coinbase’s Downgrade

Global investment bank JPMorgan downgraded Coinbase Global (Nasdaq: COIN) from Neutral to Underweight on Monday with a price target of $80. At the time of writing, Coinbase is trading at $123.43, down 28% over the past month. JPMorgan analyst Kenneth Worthington explained in a note Monday:

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 has pushed the ecosystem out of its winter will disappoint market participants.

“We value the stock on a normalized earnings power at $80/share, suggesting [a] downside of 35% in its shares,” Worthington noted. While he acknowledged continued progress in initiatives like Coinbase’s derivatives platform and L2 network, Base, he sees the threat posed by a declining crypto market cap since the U.S. Securities and Exchange Commission (SEC) approved spot bitcoin exchange-traded funds (ETFs) on Jan. 10.

The analyst continued to explain that while it has been roughly one week since the launch of spot bitcoin ETFs, the initial net inflow into these funds “seems to be far less than the cryptocurrency community was touting in the financial media, and less than what we witnessed in the first week of flows into the Gold ETF when it launched in 2004.” He added: “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.”

The JPMorgan analyst further detailed:

Cryptocurrency prices are already under pressure … 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.

Last week, another JPMorgan analyst warned of an incoming bitcoin selloff with an anticipated $3 billion Grayscale outflow. Grayscale converted its bitcoin trust (GBTC) into a spot ETF when the SEC approved spot bitcoin ETFs on Jan. 10. However, the conversion has been followed by massive outflows for Grayscale. Meanwhile, several newly launched spot bitcoin ETFs, particularly Blackrock’s Ishares Bitcoin Trust (IBIT), have seen strong inflows.

What do you think about JPMorgan’s view on the crypto market, spot bitcoin ETFs, and Coinbase? Let us know in the comments section below.