Stock Analysis & Ideas

The Impact of Potential Binance’s Takeover of FTX on Other Crypto Exchanges: Coinbase and Robinhood in Focus

There’s hardly ever a dull day in the crypto world but the events of Tuesday were seismic enough to once again send the whole sector into a tailspin.

Coins bled across the board but none more so than FTT, FTX’s native token which was down by as much 85% at some point after it became known the exchange was facing solvency issues. Following which, rival Binance – led by founder CZ – stepped in to save the day with a proposed takeover of the struggling exchange. FTX is led by wunderkind Sam Bankman-Fried, who has been touted as a “digital Warren Buffett.” That moniker might not apply anymore, then.

In what is essentially the top crypto exchange taking out one of its biggest competitors, the move consolidates Binance’s position at the top of the crypto food chain. And the question is, what kind of impact will it have on other exchanges?

Mizuho analyst Dan Dolev thinks the move spells bad news for Coinbase (COIN), the exchange, which at second spot, sits between Binance and FTX on the global rankings of exchange volumes.

“While less competition is a positive,” says the analyst, “the user overlap with FTX is smaller than many believe. More importantly, the rapid fall from grace of a crypto exchange demonstrates how fickle the crypto industry could be.”

As the “vast majority” Coinbase’s revenues are derived from the trading of crypto tokens with scant “diversification” elsewhere, Dolev goes as far as to call the situation a “red flag” for Coinbase.

The analyst rates the shares as Neutral and has a $42 price target, suggesting that even after shedding 82% of its value this year, the stock has 10% downside from current levels.

The other exchange which could be affected is millennial favorite Robinhood (HOOD), in which Bankman-Fried has an 8% stake. However, Dolev thinks the exchange will only see “limited impact” from the FTX fallout.

“Robinhood only has 14% of total revenue from trading crypto tokens,” notes Dolev. “It is far more diversified than COIN with equities and options trading.”

Accordingly, Dolev has a Buy rating for HOOD shares, backed by a $14 price target. The figure implies ~66% upside from the current trading price. (To watch Dolev’s track record, click here)

What does the rest of the Street think? Coinbase receives a Moderate Buy consensus rating, based on 11 Buys, 7 Holds and 4 Sells. Most evidently think the shares are significantly undervalued; going by the $83.8 average target, there’s room for one-year growth of 65%. (See Coinbase stock forecast)

As for HOOD, the outlook is not quite as bright; based on 3 Buys, 4 Holds and 3 Sells, the analyst consensus rates the stock a Hold. Still, the forecast calls for decent gains of 35%, considering the average price target stands at $13.15. (See Robinhood stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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