Despite growing anticipation behind the U.S. Securities and Exchange Commission’s (SEC) recent approval of Bitcoin (BTC-USD) exchange-traded funds (ETFs), not everyone is so keen on the launch, as evident from JPMorgan’s recent downgrade of Coinbase (NASDAQ:COIN) stock.
Indeed, on Monday, the investment bank released a report arguing that the launch of spot Bitcoin ETFS may come to the disappointment of investors.
“While we continue to see Coinbase as the dominant U.S. exchange in the crypto ecosystem and a leader in cryptocurrency trading and investing globally, we think the catalyst in Bitcoin ETFs that pushed the ecosystem out of its winter will disappoint market participants,” noted JPM analysts led by Kenneth Worthington.
The notion of spot Bitcoin ETFs has been prized by analysts as an approachable means of investing into the cryptocurrency without having to buy into the digital asset itself. However, JPM believes this anticipation may actually be leading to an underwhelming conclusion — one that may hurt the wider crypto market.
“Our concern is that with such enthusiasm for a Bitcoin ETF and the new flows into the cryptocurrency ecosystem that would follow, any disappointment with ETF fund flows could deflate the enthusiasm that has driven the cryptocurrency rally, largely in 2H23 and in particular since October,” the analysts wrote.
COIN Stock Falls on Bitcoin ETF Related Downgrade
JPM downgraded Coinbase from “neutral” to “underweight,” leaving its price target unchanged at $80. This has had an unfortunate effect on COIN stock shares, which are down 3% as of this writing.
Still, at about $124 per share, the stock is trading well above JPM’s price target. Reasonably so, COIN enjoyed a strong 2023, climbing 390% over the course of the year.
The analysts did concede that they still view Coinbase as the dominant U.S. crypto exchange. But they remain steadfast in their belief that the recent crypto rally is setting itself up to deflate when spot BTC ETFs prove to be less exciting that many traders presumed.
With BTC once again falling under the $40,000 per coin psychological threshold, JPM seems to believe the bulk of its reprieve from the “crypto winter” has already happened. Indeed, BTC is down more than 11% so far this year, erasing some of last year’s strong gains. Whether the crypto continues to slide remains to be seen.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
