Cryptocurrency-related stocks were boosted on Tuesday by the possibility that the fund house will be able to offer an exchange-traded fund -0.32% that tracks the spot price of bitcoin. But Mizuho analysts expect the challenges facing Coinbase Global to increase.
A federal court ruled in favor of Grayscale Investments on Tuesday in a case against the U.S. Securities and Exchange Commission, accusing the regulator of denying the crypto-asset manager a stake in its Grayscale Bitcoin Trust (ticker: GBTC ). Arbitrary behavior when attempting to convert to an ETF.
The U.S. Securities and Exchange Commission has approved ETFs that track bitcoin futures, but has opposed spot bitcoin ETFs. The launch of such funds (and other companies have applied to offer them) would make bitcoin more standardized and accessible as a financial product in the United States.
Shares of Coinbase COIN +14.91% (ticker: COIN ) surged following the news, with shares up 15% on Tuesday afternoon to trade at $84.85 per share. But for Coinbase, a spot-based bitcoin ETF would not bring much benefit, Mizuho Bank’s Dan Dolev and his team said in a research note following the ruling. He has an Underperform rating on the stock and a $27 price target.
“We believe a Bitcoin ETF could increase competition and create pricing pressure on retail prices,” he wrote.
Retail rates refer to the fees that Coinbase charges on transactions. According to Dolev, the fee charged to consumers was 1.68% in the first quarter, compared with 1.54% in the previous quarter. He worries that a bitcoin ETF will give investors a new way to invest in cryptocurrencies, putting pressure on exchange fees.
Coinbase did not detail its take rate. While the company did not respond to questions about a possible decline in adoption, Coinbase said in an emailed statement to Barron’s and other media outlets that Greyscale’s decision was “an important step toward the clarity the industry needs.” “.
The stock’s wild swings on Tuesday suggest that Coinbase investors may not be thinking about the risk.
