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Coinbase's Fortunes Soar: Positive Prospects on the Horizon with Spot Bitcoin ETF Approval, According to Wedbush Analysis

Jan 12, 2024 at 07:35 am

Wedbush, in a recent report, anticipates that the green light given by the U.S. Securities and Exchange Commission (SEC) for spot bitcoin exchange-traded funds (ETFs) will significantly favor Coinbase (COIN), a leading cryptocurrency exchange. Analysts at Wedbush emphasize Coinbase's pivotal role as an issuer or custodian in almost all approved ETFs, positioning the platform for substantial gains.

Maintaining a positive outlook on Coinbase, Wedbush has revised its price target for the stock upward from $110 to $180. Despite Coinbase shares trading at $146.61, a 3% decrease during the report's publication, analysts remain optimistic about the impact of SEC-approved bitcoin ETFs on Coinbase's future performance. The influential role played by Coinbase in these ETFs, combined with its role in facilitating incremental institutional investments in crypto assets (currently below 10%), contributes to this optimistic outlook.

Led by analysts such as Moshe Katri, Wedbush's report underscores Coinbase's involvement as an issuer or custodian in all approved ETFs, with revenue generation expected from custodian fees and additional services. The report also highlights the potential for Coinbase to attract institutional investors, considering that less than 10% of hedge funds presently invest in digital assets. Moreover, the report anticipates a growth in the number of active institutional accounts on the Coinbase platform.

However, Mizuho Securities takes a more cautious stance, issuing an underperform rating on Coinbase shares with a $54 price target. Mizuho considers the SEC's approval of spot ETFs a "pyrrhic victory for COIN," suggesting that the expected revenue upside from bitcoin ETFs might be less significant than initially thought. The investment bank warns of potential challenges, such as increased competition from brokers offering ETFs and a deeper cannibalization of high-margin spot bitcoin trading.

According to Mizuho, these factors could offset the anticipated benefits, and fundamentals are predicted to serve as a "painful reality check in coming quarters." Despite differing opinions on the extent of Coinbase's gains from SEC approval, market observers remain attentive to the evolving dynamics within the cryptocurrency exchange landscape. The industry is at a crossroads, with the potential for significant shifts in Coinbase's fortunes as it navigates the challenges and opportunities presented by the approval of spot bitcoin ETFs.

Read More: ARK Invest Liquidates Additional $4.2M Worth of Coinbase Holdings

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