Will Coinbase Stock Fall 50% Due to Negative Headlines?

Berenberg Capital analysts have given a price target of $39 for Coinbase stock (COIN). What are the imminent risks ahead?

While crypto markets and crypto stocks were making lower lows, the sentiments changed with the news of one of the world’s largest asset managers, BlackRock, filing for a Bitcoin Spot Exchange-Traded Fund (ETF). But analysts at Berenberg Capital believe that the BlackRock ETF rally is short-lived.

50% Downside for Coinbase Stock?

Berenberg believes COIN investors should curb their enthusiasm arising from BlackRock filing for a spot Bitcoin ETF with Coinbase as a custody partner. After BlackRock’s ETF filing on June 15, the price of COIN surged over 40%, even outperforming Bitcoin’s price action.

Berenberg Capital highlights some risks that could give “rise to negative headlines.” 

• Potential cease and desist order on staking program looming.
• The downside from the potential loss of staking revenue looks much larger than the potential upside from the custody role of BlackRock ETF.
• Risk to revenue from interest income from USDC.

Along with the Securities and Exchange Commission’s (SEC) lawsuit, over 10 states, including California and New Jersey, have asked Coinbase to halt its staking services. Berenberg believes that if the states issue a cease and desist order, it could cause a big dent in Coinbase’s revenue.

The analysts estimated that the potential downside from staking revenue loss is much higher than the potential upside in revenue from Coinbase serving as a custody partner for a BlackRock ETF.

Furthermore, Berenberg analysts also anticipate a risk to revenue from the interest income from USDC. They wrote in the report:

“Logical arguments can be made in support of the notion that stablecoins are securities, and that it is therefore feasible that the SEC could embrace such arguments and use them as the basis for regulatory actions.”

Due to these factors, Berenberg gave a target of $39 for COIN. 

A Risky Short

As of writing, COIN is trading at $73.30 on pre-market. Although the target is around 50% down from the current price, the analysts gave a “Hold” ranking to Coinbase stock. Berenberg analysts explain:

“We believe shorting the company’s share outright represents a risk strategy, especially as the stock could be prone to abrupt upside moves as the company pushes through the legal gauntlet that lies ahead of it.”

The chart below shows that COIN has been trading range-bound from $84 to $50 in 2023. For the stock to continue its rally, it would need a decisive weekly close above $84. Similarly, a weekly close below $50 might result in a downward trend.

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For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.