Coinbase share loses almost 3% after Bircoin’s decline

JPMorgan has downgraded Coinbase to underweight, citing the disappointing performance of Bitcoin ETFs. The launch of spot bitcoin ETFs last year was expected to lead to a new era for cryptocurrencies, with mainstream money expected to flood the space.

However, the bank cut its rating to underweight from neutral, with an unchanged price target of $80. Coinbase shares fell 4.1% to $122.90 in premarket trading. The bank believes that the catalyst in bitcoin ETFs that pushed the ecosystem out of its winter will disappoint market participants.

The SEC’s approval of spot bitcoin ETFs last month was expected to presage a new era for cryptocurrencies, with mainstream money expected to flood the space. The launch of these products allows investors who were prohibited from owning digital assets to now access the sector without owning the underlying assets themselves.

However, JPMorgan sees the potential for cryptocurrency ETF enthusiasm to further deflate, driving lower token prices, lower trading volume, and lower ancillary revenue opportunities for firms such as Coinbase.

Coinbase is expected to hold similar custodian, surveillance, and trading roles for any spot ether (ETH) ETF if approved. The world’s largest cryptocurrency has fallen in price since spot ETFs were approved, hitting a two-month low on Tuesday.

The Grayscale Bitcoin Trust (GBTC), which was converted to an ETF, lost $1 billion in value due to the insolvency of the now-defunct cryptocurrency exchange FTX, which increased selling pressure on the underlying digital asset.