JPMorgan has upgraded its assessment of Coinbase stock (COIN) from “underweight” to “neutral” following a notable rally in the crypto market, which has seen COIN surge by 37% since the bank’s downgrade last month.
In a research report shared with CryptoPotato, JPMorgan analysts noted that Bitcoin has experienced significant price appreciation since the introduction of Bitcoin spot ETFs last month, leading to a reassessment of their outlook on Coinbase.
Led by financial analyst Kenneth B. Worthington, the analysts stated:
“Given the recent acceleration in flows into Bitcoin ETFs and the substantial price appreciation of Bitcoin and now Ethereum, we are shifting our rating on Coinbase to Neutral as we anticipate higher cryptocurrency prices to sustain and enhance activity levels and Coinbase’s earnings potential as we approach 1Q24.”
This revision comes ahead of Coinbase’s Q4 2023 earnings report, following three consecutive quarters of net losses starting from 2023.
The analysts anticipate a stronger performance in Q4, driven by the resurgence in global crypto trading activity toward the end of the year and Bitcoin’s return to $44,000.
Initially, JPMorgan analysts anticipated a brief crypto rally, expecting a significant “sell the news event” following the approval of Bitcoin ETFs.
However, a significant resurgence in BlackRock and Fidelity’s funds has propelled Bitcoin to a two-year high above $52,000, benefiting other cryptocurrencies as well, with the total crypto market capitalization nearing $2 trillion.
Despite JPMorgan’s previous downgrade, COIN has surged by over 37% to $166 per share. The analysts highlighted that Coinbase’s revenue is predominantly transaction-based, positioning it as a direct beneficiary of a larger crypto market.
“After experiencing a ~100% rise in activity levels for Coinbase in 4Q23, we estimate a further 33% increase in 1Q24TD,” they remarked.
The firm also expects a surge in Coinbase’s ETH staking revenue due to Ethereum’s 20% rise this month.
However, Coinbase faces risks from ongoing ETF adoption, potentially diverting business from the company as an entry-level spot trading venue for Bitcoin. Both BlackRock and Grayscale, which manage the two largest Bitcoin ETFs, use Coinbase as a custodian for their coins.