While crypto exchange Coinbase (NASDAQ:COIN) was never really the only game in town when it came to buying and selling cryptocurrency, it has enjoyed a point of prominence in that field for some time. Most of the field was just “Coinbase” and “everybody else.” Well, “everybody else” just got a lot bigger today, and Coinbase took it on the chin as a result. Coinbase shares are down over 8% in Thursday afternoon’s trading, thanks mainly to the new entrant in the field.
Indeed, CME Group (NASDAQ:CME) is planning to fire up its own Bitcoin (BTC-USD) trading operations in a bid to add profit from traders who want to add crypto exposure to managed funds. Since CME Group is the largest futures exchange platform around, that could represent a serious loss of potential business for Coinbase, who was eagerly looking to land a piece of that institutional Bitcoin market. Throw in the fact that CME Group can function as a “regulated marketplace,” and that’s going to be all the bigger names wanted to hear in a lot of cases.
A Major Disaster Afoot?
This represents a major potential land mine for Coinbase. While it will hardly completely ruin Coinbase’s trade, it will make a serious new competitor in the field that Coinbase will have a tough time adapting to. Indeed, Coinbase’s recent run of success has delivered in grand style, even allowing it to be a major lender.
Reports note that at the end of March, Coinbase had around $800 million in loans outstanding to major traders, up more than fourfold from the previous year, when it was just $194 million. If CME Group gets involved, it’s a safe bet that at least some of that traffic will migrate away from Coinbase unless Coinbase can come up with compelling reasons to stay. Recent service outages, meanwhile, will not help there.
Is Coinbase a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COIN stock based on nine Buys, nine Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After a 228.9% rally in its share price over the past year, the average COIN price target of $244.37 per share implies 21.26% upside potential.
