JPMorgan Upgrades COIN To Neutral Due To Crypto Market Rally

JPMorgan has boosted its outlook on Coinbase stock (COIN) from “underweight” to “neutral” after following a better-than-expected crypto market rally to kick off the year.

In a research report shared with CryptoPotato, the bank’s analysts argued that Bitcoin has experienced “meaningful price appreciation” after the launch of Bitcoin spot ETFs last month.

JPMorgan’s Revised Coinbase Outlook

Led by financial analyst Kenneth B. Worthington, the authors wrote:

“Given the acceleration in recent days of flows into Bitcoin ETFs and the significant price appreciation of Bitcoin and now Ethereum, we are returning to a Neutral rating on Coinbase as we see the higher cryptocurrency prices not only sustaining, but improving activity levels and Coinbase’s earnings power as we look to 1Q24.”

The bank’s analysis arrives ahead of Coinbase’s Q4 2023 earnings report, following three consecutive quarters of net losses since the start of 2023.

Analysts expect Q4 to have had a stronger showing for the company, given the resurgence in global crypto trading activity at the end of the year, alongside Bitcoin’s return to $44,000 at the time.

At first, JPMorgan analysts predicted that the crypto rally would be short-lived, anticipating a strong “sell the news event” once Bitcoin ETFs were approved.

Indeed, Bitcoin suffered a temporary retracement to $38,000 last month, prompting the bank to downgrade COIN.

However, a major second wind to BlackRock and Fidelity’s funds has brought Bitcoin back to a two-year high above $52,000. The rally has helped other coins as well, with the total crypto market cap now nearing $2 trillion.

Coinbase Versus BlackRock

Meanwhile, COIN has already risen over 37% to $166 per share since JPMorgan’s prior downgrade.

As noted by analysts, Coinbase’s revenue is primarily transaction-based, making it a “direct beneficiary of a larger cryptocurrency market.”

“After activity levels rose ~100% for Coinbase in 4Q23, we estimate they are up an additional 33% 1Q24TD,” they wrote.

The firm also expects that Coinbase’s ETH staking revenue has surged on the back of the token’s 20% rise this month.

Coinbase still faces risks from ongoing ETF adoption which could steal business from the firm as an entry-level spot trading venue for Bitcoin. The two largest Bitcoin ETFs managed by BlackRock and Grayscale both use Coinbase as a custodian for their coins.

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