Coinbase, one of the leading cryptocurrency exchanges, has seen its price target hiked to $276 from $200 by broker Oppenheimer. This increase comes as digital asset adoption continues to grow, especially after the approval of spot bitcoin exchange-traded funds (ETFs). In a research report released on Wednesday, Oppenheimer stated that Coinbase is well positioned to benefit from the long-term adoption of blockchain technology.
Analysts Owen Lau and Guru Sidaarth estimate that Coinbase’s trading volume in the first quarter of 2024 will be up 95% quarter-on-quarter and 107% year-on-year, reaching $300 billion. They attribute this growth to the ongoing adoption of digital assets, particularly after the approval of spot bitcoin ETFs in January. Additionally, the liquidity in the cryptocurrency space has been increasing, with the average market cap of USD Coin (USDC) rising by 12% quarter-on-quarter to $28 billion.
USDC is a stablecoin issued by Circle, which is backed by Coinbase. The exchange earns gross interest income on USDC outstanding balances. Given the positive outlook for Coinbase, Oppenheimer raised its price target for the stock to $276. At the time of publication, Coinbase shares were trading 2.5% higher at $258.
Despite the strong momentum behind Coinbase, there are some potential risks that investors need to be aware of. One major concern is the ongoing lawsuit with the Securities and Exchange Commission (SEC). Oppenheimer believes that this legal battle could be lengthy and may ultimately end up in the Supreme Court for a final decision.
Furthermore, there was initially an expectation for the approval of a spot ether (ETH) ETF in May, but Oppenheimer now sees a low probability of this happening. While the stock has performed well, with a 100% increase since January compared to a 6% rise for the S&P 500 index, there is still caution regarding near-term volatility.
Overall, Oppenheimer remains positive on the long-term adoption of blockchain technology but advises investors to be mindful of the potential risks associated with investing in Coinbase. The company offers unique exposure to the growth of the cryptocurrency market, but uncertainties such as the SEC lawsuit and the possibility of regulatory hurdles could impact its future performance.