Crypto stocks are inevitably tied to the success or lack of it in the broader crypto ecosystem. Essentially, it’s a basic equation: crypto bull market = crypto stocks go up, crypto bear market… you get the drift.
According to CoinGecko, the total cryptocurrency market cap reached its highest point in November 2021, when it stood at around $3 trillion, before dropping to around $1 trillion throughout 2022 and 2023 as the market entered a bearish phase and the Fed started hiking interest rates (over 500 basis points). However, with the onset of a new bull market last year and the SEC’s approval of several spot Bitcoin ETFs in January, the investor base expanded, and cryptocurrency prices have been on the up again.
Bank of America analyst Mark McLaughlin sees the current market as more stable than previous “boom periods,” despite its volatility, because there’s a larger pool of investors, including institutions, thanks to the new spot ETFs and more developed brokerage services. Secondly, there is a stronger emphasis on a select group of “mature coins,” with the top 10 coins comprising 83% of the market cap compared to 73% in November 2021, with a reduced focus on meme coins.
So, what’s the verdict on Coinbase (NASDAQ:COIN)? McLaughlin thinks it’s time for a rethink. He’s bumped up his rating on COIN from Underperform (i.e. Sell) to Neutral, setting a price target of $217. (To watch McLaughlin’s track record, click here)
McLaughlin sees several reasons why the outlook for the leading crypto exchange appears more favorable. These include: “1) the current macro environment has been a positive for cryptocurrency market cap appreciation and trading volumes; (2) COIN’s expense discipline and ability to benefit from operating leverage following large expense cuts in 2022 will help it maintain profitability going forward; (3) increased diversification of revenue sources less correlated with overall volumes should dampen earnings volatility.”
Shifting our focus to broader market sentiment, COIN stock garners a Moderate Buy consensus rating, based on a mix of 9 Buy recommendations, 10 Holds, and 2 Sells. With an average price target of $248.22, analysts anticipate a modest upside potential of 4.5% for the shares. (See Coinbase stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
