For a minute there, 2023 appeared to be Coinbase’s (NASDAQ:COIN) year. With good reason, too; since January dawned, Coinbase stock gained over 106%, looking like a decent port in a storm, while tech stocks took beatings in the market. But the cryptocurrency exchange’s safe status is tarnishing, and new concerns about regulatory hassles are prompting investors to turn away.
The regulatory issues surrounding crypto were enough to prompt Christopher Brendler with D.A. Davidson to knock down his rating from Buy to Hold. Brendler noted that “…the near-term path looks increasingly treacherous.” However, Coinbase’s improvements in “…clarity and a level playing field” may help give it an advantage sufficient to clear some of those short-term hurdles. Coinbase’s exit from Japan is a pretty good example of one of those short-term hurdles.
Some points may even ultimately help Coinbase. For instance, new rules that may require investment advisors registered with the Securities and Exchange Commission to place assets with “qualified custodians” may swing business Coinbase’s way. Coinbase’s Custody Trust Co. seems like it could be considered a “qualified custodian” according to SEC rules. In addition, the firm’s lack of a stablecoin is also keeping it out of some SEC lines of fire as well, like those targeting Binance.
With the near-term crypto market clearly unsettled, it’s little surprise to see Wall Street remain cautious. Analyst consensus on Coinbase is currently a Hold. However, Coinbase stock also comes with 28.01% downside risk thanks to its average price target of $49.50.
