JPMorgan: Coinbase Underweight, Bitcoin ETF May Disappoint

• Crypto Markets Could Face Disappointment in 2024 Due to Spot Bitcoin ETFs, Says JPMorgan
• Coinbase Facing Potential Challenges Despite Positive Growth
• Concerns Over SEC Approval of Spot Bitcoin ETFs
• JPMorgan's Worries About Bitcoin ETFs
• Potential Impact on Bitcoin Prices and Firms like Coinbase
• Role of Coinbase with Spot Ether ETF
• Cryptocurrency Prices Affected Post Spot ETF Approval

Crypto Markets Could Face Disappointment in 2024 Due to Spot Bitcoin ETFs, Says JPMorgan

In a research report published on Monday, JPMorgan stated that the key driver for crypto markets in the previous year, the introduction of spot bitcoin (BTC) exchange-traded funds (ETFs), might yield disappointing results for investors in 2024. This led to a downgrade in the rating of US exchange Coinbase (COIN) to neutral. The bank altered its rating on the stock to neutral from underweight, maintaining its price target at $80. As a result, Coinbase shares experienced a 4.1% drop, reaching $122.90 in premarket trading.

Coinbase Facing Potential Challenges Despite Positive Growth

Despite a staggering 390% increase in the stock last year and the exchange's progression in several significant initiatives, 2024 might prove to be a difficult year. JPMorgan continues to regard Coinbase as the leading US exchange in the crypto ecosystem and a global trailblazer in cryptocurrency trading and investment. However, the bank expresses concern that the bitcoin ETFs, which helped drive the ecosystem out of its slump, might let down market participants.

Concerns Over SEC Approval of Spot Bitcoin ETFs

Last month's approval of spot bitcoin ETFs by the Securities and Exchange Commission (SEC) was widely anticipated to signal a new chapter for cryptocurrencies, with the expectation of mainstream finance entering the market. These new products offer access to investors previously barred from owning digital assets, enabling them to participate in the sector without owning the underlying assets themselves.

JPMorgan's Worries About Bitcoin ETFs

The bank voiced its concern that the excitement for a bitcoin ETF and the subsequent influx into the cryptocurrency ecosystem could lead to a decrease in enthusiasm if ETF fund flows disappoint, which could deflate the cryptocurrency rally seen largely in the second half of 2023 and especially since October.

Potential Impact on Bitcoin Prices and Firms like Coinbase

The note from JPMorgan highlights that the bitcoin price is already feeling the strain, dropping below $40,000. The bank anticipates the potential for the enthusiasm surrounding cryptocurrency ETFs to further deflate, leading to decreased token prices, lesser trading volume, and dwindled ancillary revenue opportunities for firms such as Coinbase.

Role of Coinbase with Spot Ether ETF

If a spot ether (ETH) ETF gets approved, Coinbase is expected to play similar custodial, surveillance, and trading roles, as mentioned in the report.

Cryptocurrency Prices Affected Post Spot ETF Approval

Since the approval of spot ETFs, the price of the largest cryptocurrency has dipped, reaching a two-month low on Tuesday. The failure of the crypto exchange FTX$3.28 -5.38% and its bankruptcy estate's dumping of $2 billion worth of the Grayscale Bitcoin$42,260 -0.64% Trust (GBTC) post its conversion to an ETF has intensified the selling pressure on the underlying digital asset.

Edited by Jonathan Stoker