Bloomberg News reports that analyst Patrick Moley was found downgrading Coinbase due to the continuing legal battle that is on with the SEC or the Securities and Exchange Commission. The continuous ambiguity related to the regulation of cryptocurrency in the United States is another reason.
More about the downgrade
Moly expressed on July 5th that there were uncertainties in regulation. It has made it challenging to anticipate the future revenue projection of Coinbase wisely. As such, he has altered his rating to neutral instead of overweight, which he had earlier stated.
There was a revision by Moley of the recommendation related to the largest crypto exchange in the United States. He has been anticipating that the quarterly trading volumes of the second quarter and the transacting user tools per month might be at the lowest level over two years.
Moley stated that the escalating crypto prices have not been able to translate to enhanced trading volumes for the biggest crypto exchange in the quarters recently. Not only that, the timing of a spot Bitcoin exchange-traded fund approval is being guessed by people.
Despite the above scenario, there is potential, as seen by Moley, for Coinbase. It is expected to be a substantial player in the digital asset industry. However, this will be true provided there is clarity in the regulations and they are achieved.
In June, Moody had also downgraded Coinbase, keeping it at “negative” from “stable” as it commented on the health of the liquidity position.
The market share of Coinbase has been rising steadily, although there was this SEC lawsuit. There has also been market dominance which peaked at 64% in June. It has taken place concurrently with the charges by the SEC.
The looming concerns
The lawsuits of the SEC have raised concerns. But that has not kept the traditional financial institutes from partnering with Coinbase. BlackRock, ARK Investments, and Fidelity, key players in the market, have selected Coinbase as the surveillance-sharing associate for the spot exchange-traded fund or ETF filings.
There is a lot of uncertainty related to the future revenue projection of Coinbase. But the resubmission of many spot Bitcoin exchange-traded fund applications which state an intention of engaging in an agreement, has been reflecting consistent faith in the crypto exchange.
