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Why is Coinbase back on the decline?

The cryptocurrency exchange’s shares took a huge hit following another bout of not-so-good news from China regarding its stance on crypto trading.

Source: Bloomberg
  • Coinbase Global Inc (All Sessions) (NASDAQ: COIN) share price fell over 7% since the start of the week
  • The decline came after China’s central bank said it urged several banks and fintech firms to step up their checks on cryptocurrency transactions
  • Bitcoin and Ethereum, the two largest digital currencies, sunk by 10% and 14% respectively following the news
  • Analysts on average still envision a 76.5% upside potential on the stock, despite its first ever ‘sell’ rating earlier this month
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Coinbase stock price: What’s the latest?

Coinbase Global shares fell as much as 4.4% on Monday (21 June 2021), after China’s central bank said it has intensified its crackdown on cryptocurrency trading.

During a recent meeting, the People’s Bank of China (PBOC) urged several banks and payment platforms to step up their checks on cryptocurrency transactions conducted on their channels, Reuters reported.

‘Speculative trading in virtual currencies roils economic and financial order, spawns the risks of criminal activities such as illegal asset transfers and money laundering, and endangers people's wealth,’ the PBOC said in a statement.

The PBOC had reportedly advised financial institutions, including China Construction Bank, Industrial and Commercial Bank of China and Ant Group’s Alipay, to begin more thorough investigations into clients’ accounts, and freeze the ones that had engaged in cryptocurrency transactions.

Coinbase opened 3.5% lower on Tuesday (22 June) at US$214.80.

Bitcoin, the world’s largest and most traded digital currency, also sunk nearly 10% on the day to a two-week low of US$32,600 following the news.

Ethereum, the second most valuable crypto asset, took a 14% tumble to under US$2,000.

How do analysts rate Coinbase?

This latest development comes a month after the country’s cabinet, the State Council, had stated that it would tighten restrictions on bitcoin trading and mining.

Besides issuing a warning to investors against speculative crypto trading, the State Council also banned financial and payment institutions from providing cryptocurrency services.

Coinbase then dropped off nearly 10% to a then-low of US$224 a share.

For now, analysts still appear upbeat on the cryptocurrency trading platform’s stock, with a majority of analysts - 11 out of 16 - rating it a ‘buy’, according to the latest sentiments published by MarketBeat.

The analysts have also given a consensus price target of US$378.33, which equates to a 76.5% upside potential from its last traded price of US$215.36.

The latest rating and price estimate came from Canaccord Genuity analyst Joseph Vafi, who initiated coverage with a ‘buy’ rating and US$285 target.

His prediction is based on the fact that the stock is a ‘super on-ramp’ to the cryptocurrency market, and that the business itself looks set to benefit from the envisioned blockchain payments boom.

On the other hand, Raymond James analyst Patrick O'Shaughnessy gave COIN its first ever ‘sell’ call, stating that while cryptocurrency is ‘a great unknown’, fee compression is not.

The analyst believes that Coinbase’s premium pricing is bound to come under pressure at some point due to low barriers to entry to the space, thus limiting its competitive advantage in the long run and potential revenue growth rates.

What is your call on Coinbase?

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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