Forecasting how much income Coinbase Global would generate has become nearly impossible because to the uncertainties surrounding the company, an expert claimed.

According to reports, Piper Sandler analyst Patrick Moley has downgraded Coinbase because of its ongoing legal dispute with the US Securities and Exchange Commission and the continued vagueness around US regulation of cryptocurrencies.

The Piper Sandler analyst maintains an Overweight rating on COIN shares because they believe there is “too much uncertainty to prudently project revenues in future years.”

From overweight to neutral, Moley lowered Coinbase’s rating and forecast a drop of 25% from the crypto exchange’s current market price. The stock is currently trading at approximately $77, while the investment bank’s most recent price target is $60.

Piper Sandler says Coinbase can fall 25% as regulatory uncertainty looms https://t.co/oyeZsUEfkJ

— CNBC (@CNBC) July 5, 2023

Coinbase: On Downgrades & Regulatory Challenges

Coinbase, also known as Coinbase Global, Inc., is an American company listed on the stock market, specializing in running a platform for cryptocurrency exchange. The company operates in a decentralized manner, with all its employees working remotely. Coinbase holds the distinction of being the largest cryptocurrency exchange in the United States in terms of trading volume.

Despite the fact that Coinbase Global’s stock has increased by more than 125% this year, regulatory challenges that still loom over the cryptocurrency broker support the idea that investors should exercise care with the stock.

The rally, according to Moley, is a result of both the surge in applications for spot-Bitcoin ETFs and rising cryptocurrency prices.

Moley said:

“We believe the appreciation has likely been driven by a combination of rising crypto prices and a number of large asset managers filing for spot Bitcoin ETFs (some of which have named COIN as custodian).”

Rising Crypto Prices Haven’t Lifted Company Shares

The analyst said in a client note that rising cryptocurrency prices have not resulted in higher trading volumes for COIN in the past few months and that the timing of the approval of a spot bitcoin ETF is “anyone’s guess.”

COIN is nearing major resistance at around $85, and the crypto has mostly been trading sideways from $85 to $50 in the last few weeks.

The analyst is not the first to express worry about Coinbase being under regulatory pressure. Berenberg issued a warning last week after investors flocked to the stock following BlackRock Inc.’s application for a spot-Bitcoin exchange-traded fund, identifying the crypto exchange as a custodian.

Analysts predict that Coinbase will soon reveal its lowest trading volumes and monthly active user counts in over two years. This anticipated disclosure may shed light on the company’s recent performance and provide insights into the state of the cryptocurrency market.

They note that the exchange has the potential to become a major player once regulatory clarity is achieved in the US, but that before they can express a more optimistic outlook, significant progress must be made on the regulatory front and in the fundamental aspects of the business.

Despite concerns raised by the SEC’s lawsuits, traditional financial institutions such as BlackRock, Fidelity, and ARK Investments have chosen to partner with Coinbase as their surveillance-sharing partner for spot-Bitcoin ETF filings.

Featured image from USA Today