Wall Street has been looking at Coinbase (NASDAQ:COIN) of late, and investors seem to like what they see. Over the past two weeks, Coinbase shares are up an impressive 40% and trade close to their 52-week high.
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The rally, says Mizuho’s Dan Dolev, can be attributed to a couple of reasons. For one, there’s growing excitement around the potential for a Bitcoin ETF approval in the near-term. The other catalyst is down to the troubles faced at Coinbase’s biggest rival with the rally partly based on “anticipation of potential share gains for COIN in wake of outflows from Binance, the industry’s largest exchange.”
Recall, on November 21, Binance co-founder and CEO Changpeng Zhao resigned and admitted guilt for violating U.S. anti-money laundering regulations as part of a $4.3 billion agreement, bringing to a close an extensive investigation into the world’s leading cryptocurrency exchange. Zhao’s resignation was followed by significant net outflows from the Binance platform and evidently investors reasoned some of that business will be making its way to Coinbase.
However, pouring cold water on that line of thinking, Dolev says the data does not support such a notion. In fact, weirdly enough, the opposite happens to be true. In terms of daily spot volumes, Binance is the largest industry leader, with an average volume per day of ~$11 billion in November prior to the settlement, amounting to around 25-30% share of the leading 30 crypto exchanges. Over the last week, Binance’s daily volumes have averaged only ~$9 billion, yet at the same time Coinbase’s share of industry volumes has not only not grown but has actually trended in the other direction. Whereas, before the agreement, Coinbase’s November share of trading volumes amongst ~30 of the biggest global crypto exchanges stood at 4.3%, since then, it is down to 4.0%.
It’s not all bad news, however. With excitement growing around the prospect of a Bitcoin ETF approval, trading volumes have increased significantly in November. While this is not “idiosyncratic to COIN,” it means Dolev has increased some Q4 estimates and raised his price target from $31 to $35.
Don’t get too excited, though, as Dolev remains the Street’s most prominent COIN bear; his new target still suggests the shares are overvalued by 76%. No need to add, Dolev’s rating stays at Underperform (i.e., Sell). (To watch Dolev’s track record, click here)
Coinbase elicits a wide spectrum of views, and ultimately, based on a mix of 7 Buys and Sells, each, plus 6 Holds, the stock claims a Hold consensus rating. According to the $89.78 average target, a year from now, shares will be changing hands for a 38% discount. (See Coinbase stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
