Coinbase, the popular cryptocurrency exchange, may encounter near-term volatility in its stock price, warns Oppenheimer analyst Owen Lau.
The primary reasons behind this anticipated turbulence are Coinbase’s ongoing lawsuit with the U.S. Securities and Exchange Commission (SEC) and the expected decline in Bitcoin’s price.
As of now, Coinbase’s stock is priced at $125, but its future appears uncertain due to regulatory challenges.
In a recent interview with Yahoo Finance, Lau highlighted the lingering regulatory uncertainty surrounding Coinbase.
The SEC has accused the exchange of violating security laws, and until a resolution is reached, Coinbase’s stock may experience fluctuations.
Lau explained, “There is still a regulatory overhang, we still don’t have clear regulations in the United States right now.”
Interestingly, Bloomberg litigation analyst Elliot Stein expressed optimism about Coinbase’s chances of a favorable outcome in its lawsuit against the SEC.
Stein predicts a 70% probability of Coinbase emerging unscathed from the legal battle.
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Coinbase’s recent stock performance adds to the uncertainty. Over the past 30 days, the company’s stock price has declined by approximately 28%.
However, it has shown an overall gain of around 67% in the past three months.
This upward trend was driven by Bitcoin’s price surge towards the end of 2023, fueled by optimism surrounding the potential approval of a spot Bitcoin ETF by the U.S. SEC, which was granted on January 10th.
Despite this initial positive development, Bitcoin’s price has faced a setback, dropping by approximately 10.37% in the last two weeks following the SEC’s approval of spot Bitcoin exchange-traded funds.
At the time of writing, Bitcoin’s price stands at $41,863. Owen Lau believes that Bitcoin may continue to experience short-term price fluctuations until a significant catalyst emerges.
Adding to the challenges, JPMorgan recently downgraded Coinbase’s stock to an “underweight rating” on January 23rd.
The decision was influenced by the declining price of Bitcoin and the listing of spot Bitcoin ETF shares.
These factors have cast a shadow of uncertainty over Coinbase’s near-term future in the cryptocurrency market.
In conclusion, Coinbase’s stock price is likely to remain volatile in the coming months, with regulatory uncertainties and Bitcoin’s price fluctuations acting as key drivers of this instability.
Traders and investors will need to closely monitor developments in the ongoing lawsuit and the broader cryptocurrency market to make informed decisions.
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