Coinbase Gets a ‘Buy’ Rating With A $400 Target Price as COIN Follows Bitcoin & Ether
With the initial negativity “flushed out,” COIN shares price is expected to rally as it moves in a “strong correlation” to the top crypto asset. Amidst this, the company's head of the capital-markets group has left within just four months of taking the role.
DA Davidson analyst Christopher Brendler has given cryptocurrency exchange Coinbase a ‘Buy’ rating and a $400 target price.
As of writing, COIN shares have been trading at $280.58, up 24% from earlier last week. However, it is still down about 35% from its $429.54 peak, briefly hit on its debut day on Nasdaq on April 14, marking the top for Bitcoin price at the time.
Coinbase will be reporting its earnings this week, and this is expected to give it a further boost, now that the initial negativity has “flushed out,” according to Blue Line Capital founder and President Bill Baruch, who expects the platform’s verified users to exceed 60 million.
As COIN share price comes off of a good turn line support and having broken out of a wedge of resistance, Baruch expects the price to rally to $290-$300.
Correlation with Bitcoin & Ether
Coinbase basically continues to act as a beta play on the Bitcoin and cryptocurrency market.
“It’s a very rough proxy” based on the fact that, historically, “strong correlation” has been seen between Bitcoin and some of Coinbase’s most important operating metrics such as monthly transacting users, said BTIG’s Mark Palmer, who has a buy rating on Coinbase and a $500 price target.
BTC, along with Ether and the broad crypto market, has been trending up since July 21st. In the past two weeks, BTC has gone up 23%, Ether 42%, and the total crypto market cap has jumped over 26% during this period.
However, unlike Coinbase, which is bound to the trading pattern of the traditional markets, crypto trades 24/7.
According to Jerry Braakman, CIO of First American Trust, which manages $2 billion, it makes sense that Coinbase is correlated to the price of Bitcoin and Ethereum because the platform’s business model is “leveraging that value for revenue.”
However, Coinbase’s dependency on the leading cryptocurrency as a source of revenue has been declining, noted BTIG’s Palmer. Bitcoin represented about 44% of the exchange’s transaction revenue last year, down from 60% in 2019. He said,
“What we fully anticipate is that as Coinbase continues to diversify its platform by adding additional coins, which it’s been doing at a much quicker pace of late, and builds out its institutional prime brokerage platform, that correlation should recede.”
Capital-Markets Head has Left
Amidst all this, Brett Redfearn has left Coinbase within just four months of taking the role of the head of the platform’s capital-markets group.
Redfearn, a former official at the SEC who joined the exchange earlier this year, resigned from the firm in late July after Coinbase decided to shift its priorities away from digital-asset securities, according to the people familiar with the matter.
Just last week, Brian Brooks stepped down as the CEO of competing exchange Binance.US, the US-based entity of leading cryptocurrency exchange Binance Holdings, just three months after taking up the role due to “differences over strategic direction.”
Before becoming the head of OCC from May 2020 to January 2021, where he led efforts to provide regulatory clarity for stablecoin and digital asset custody, Brooks was the Chief Legal Officer at Coinbase.