Bank of America Upgrades Coinbase’s Rating to Neutral Amid Crypto Boom

Top financial giant, the Bank of America (BAC) has upgraded the rating of the prominent digital asset exchange, Coinbase from “Underperform” to “Neutral” due to the positive dynamics in the cryptocurrency market.

Initial COIN Shares Reaction

Following the upgrade of crypto exchange shares by the investment bank, it experienced a 2.5% increase in pre-market trading on Friday and a price target from $110 to $217. At press time, the stock was trading around $209

This upgrade and revised price target reflect increased confidence in Coinbase’s performance and potential in the market. The Wall Street giant upgraded the exchange’s stock due to positive market conditions and increased trading volumes in the cryptocurrency markets.

Analyst Mark McLaughlin said that Coinbase’s expense discipline and increased diversification are expected to contribute to its earnings.

Coinbase: challenges might be a major setback 

With Coinbase making impressive progress in the digital exchange realm, McLaughlin has expressed doubts regarding potential risks that could hinder the stock’s growth potential.

He emphasized that the risks include the exchange’s reliance on transaction revenue for profitability and the regulatory uncertainties associated with the ongoing lawsuit with the U.S. Securities and Exchange Commission (SEC).

As the legal saga went on, the digital exchange in return filed an interlocutory appeal against the SEC over differences in opinions. 

On top of everything, the digital exchange and its CEO, Brian Armstrong, are currently embroiled in a lawsuit over allegations of deceiving investors and operating an illegal business model.

Competitors’ news rattles Coinbase

The top cryptocurrency exchange had an outstanding performance that surpassed analysts’ predictions in the first quarter of the year. 

According to JMP Research, the company’s financial results showed strong revenue growth and increased user engagement during this period. Additionally, it has recently introduced support for the Bitcoin Lightning Network, giving users the option to choose between Lightning and the traditional Bitcoin network for their Bitcoin transfers.

After the Chicago Mercantile Exchange (CME) launched micro Bitcoin futures, a report had suggested that it might enter the market of spot bitcoin trading too.

The news has caused Coinbase shares to experience a decline of over 9%. This development could pose as a potential competitor to exchanges like Coinbase.