Market News

Here’s How Coinbase (NASDAQ:COIN) will Protect Ether Holdings during the Merge

Story Highlights

As the great Ethereum Merge approaches next month, Coinbase is taking steps to safeguard its users. Here’s all you need to know about the development.

After completing the Goerli public test net merge this month, the great Ethereum (ETH-USD) merge is anticipated next month, and excitement remains palpable. The transition from a proof of work (PoW) mechanism to a proof of stake (PoS) protocol is expected to reduce its energy consumption drastically. Coinbase (COIN), one of the leading crypto exchanges, is taking steps to keep customers’ assets safe during the event. The exchange will halt deposits and withdrawals of new Ethereum and ERC-20 tokens.

Further, while Coinbase does not expect other networks and currencies to be impacted, it is taking this step to make sure its systems successfully reflect the transition.  Further, “Staked ETH (ETH2) balances will not be unlocked at the time of the merge, or be available to trade or transfer until the Ethereum protocol upgrade completes.”

Additionally, the exchange’s Prime users that have ETH and ERC-20 balances could see a temporary delay in custody withdrawal. Finally, the exchange will evaluate any potential forked tokens on “a case by case basis.”

The merge is expected to make Ethereum more secure, and while it does improve energy efficiency, gas fees or transaction speeds may not see major changes, but the overall supply of tokens could come down. Further, after the merge, the next phases, called surge, verge, purge, and splurge, are on the horizon as well, which will make Ethereum highly scalable.

Is COIN a Buy or Sell?

Coinbase shares have nosedived 73.4% so far this year, and short interest in the stock is nearing 18% after its recent dismal second-quarter performance. The Street is cautiously optimistic about the stock with a Moderate Buy consensus rating and an average COIN stock price target of $101.18, which implies 51.6% potential upside.

Hedge funds, in contrast, are very positive about Coinbase and have used the crypto winter to increase their holdings by 1.4 million shares in the last quarter alone. Importantly, some of the biggest names on Wall Street have entered Coinbase.

This includes Joel Greenblatt’s Gotham Asset Management, Ray Dalio’s Bridgewater Associates, and Julian Robertson’s Tiger management.

Closing Thoughts – Coinbase Remains Dependent on Crypto Prices

Coinbase has been at the receiving end of sagging crypto prices and investor confidence throughout this year. How soon its fortunes can change will hinge on when the crypto winter ends. Both Bitcoin (BTC-USD) and Ethereum, in the meantime, are down 31.4% and 18%, respectively, in the past six months.


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