Piper Sandler Downplays Coinbase Stock, Expects 25% Decline

Paigambar Mohan Raj
Source: Nasdaq

According to Piper Sandler, investors need to steer clear of Coinbase (COIN) due to the uncertainty that it is currently engulfed in. The financial giant also downgraded the crypto exchange from “overweight” to “neutral,” citing the SEC’s recent lawsuit against the company. The firm is facing charges by the federal agency for allegedly operating as an unlicensed broker and exchange.

According to analyst Patrick Moley, the downgrading was also influenced by a lack of regulatory clarity. He dropped his price objective from $65 to $60, pointing towards a 24.9% decline in shares from Monday’s close.

While Moley noted Coinbase’s stock increase of 126% year to date, he added that the increase was probably brought on by both higher prices and a number of asset managers submitting applications for spot Bitcoin ETFs. Some of these asset managers, such as BlackRock, have named COIN as a custodian.

Also Read: BlackRock Includes Coinbase SSA in Spot Bitcoin ETF Refiling

However, according to Moley, recent quarters have not seen an uptick in COIN trade volumes despite higher crypto prices. Additionally, “the timing of a spot bitcoin ETF approval is anyone’s guess,” he added.

Does the financial giant expect Coinbase to recover?

For the second quarter, the analyst anticipated Coinbase to have its lowest quarterly trading volumes. Moreover, the analyst predicted the firm will report its lowest monthly totals of transacting users in more than two years. In premarket trade on Wednesday, COIN shares fell by more than 2.7%.

However, the analyst did say that they expect Coinbase to be a major player in the industry when we do eventually get regulatory clarity in the U.S. The firm will take a positive stance when there is a more positive development on the regulatory front. Furthermore, the financial giant would also like to see a convincing turnaround in the underlying fundamentals of the business.

Also Read: SEC vs. Coinbase Hearing to Kick Off Much Earlier Than Expected

Therefore, based on the arguments presented by Piper Sandler, the crypto industry will have to wait on further regulatory clarity from the U.S. government, in order to be on the right side of financial institutions.