Coinbase downgraded by analysts amid regulatory woes

Earlier this week, the share price of Coinbase (NASDAQ: COIN) experienced a decline of over 2% after Piper Sandler downgraded their rating from Overweight to Neutral. The financial firm also revised the price target from $65.00 to $60.00.

Piper Sandler’s decision to revise Coinbase’s rating stems from the recent case brought by the U.S. Securities and Exchange Commission (SEC) and the prevailing lack of regulatory clarity in the country. These factors have contributed to a level of uncertainty that makes it difficult to accurately project revenues in the coming years, leading the firm to revise its position on the stock.

Since the SEC accused Coinbase of operating an unregistered securities exchange in June, Coinbase shares have surged by an impressive 126% year-to-date, with a 55% increase since the accusation. Piper Sandler attributes this surge to the rising prices of cryptocurrencies and the potential involvement of Coinbase in Bitcoin exchange-traded funds (ETFs).

Although cryptocurrency prices have been on the rise, Coinbase’s trading volumes have not followed suit in recent quarters. Additionally, it is unclear when a spot bitcoin ETF will be approved, causing uncertainty among analysts. Piper Sandler predicts that Coinbase’s second-quarter trading volumes and monthly transacting user totals will be the lowest they’ve been in over two years.