Coinbase jumps as investors search for bottom in crypto prices

[NEW YORK] Coinbase Global jumped by the most in almost 3 months on Monday (Feb 28), reversing last week’s decline that was fuelled by risk-off sentiment and the company’s warning that trading volumes could drop.

Shares in the biggest US cryptocurrency exchange climbed as much as 8.7 per cent on Monday to US$192.23 amid a broader bounce in stocks linked to digital currencies. But the stock remains down around 25 per cent this year due to a flight to haven assets amid the buildup to Russia’s war with Ukraine.

The stock dropped 6.5 per cent last week as Coinbase said trading volume would probably decline during the first quarter. Monday’s rally, which is lifting the shares more than 10 per cent above their 2022 low reached on Jan 27, arrives amid new speculation that crypto prices have bottomed out and that traders have already priced in the risks facing the firm.

“With cryptocurrency adoption rising and Bitcoin demand still early in the cycle, trading activity at Coinbase should grow and could support a valuation of US$400-US$600 a share, 17-75 per cent ahead of current levels, even if 2021 results cool from 1Q’s blowout,” Bloomberg Intelligence analyst Julie Chariell wrote in a note on Friday. “Our more-tepid scenario with fewer monthly users and revenue per user puts shares as low as US$200.”

Among Wall Street analysts, Coinbase has 20 buy ratings, 5 holds and 2 sells with an average price target of US$305 – implying a roughly 60 per cent upside for the stock over the next year, according to data compiled by Bloomberg.

The full impact of Russia’s invasion of Ukraine on crypto trading remains to be seen, but the potential for damage is high. Russia has the third-most Bitcoin mining operations in the world, with about 11 per cent of the global hashrate share, Coinbase head of research David Duong wrote in a note.

“The geopolitical risks priced into risk assets appear to be peaking, with the latest developments suggesting that we may be approaching or have approached a short-term bottom for crypto asset prices,” he wrote.

A spokesperson for Coinbase declined to comment. BLOOMBERG