#crypto2023 Berenberg Capital analysts have given a price target of $39 for Coinbase stock (COIN). What are the imminent risks ahead?

While crypto markets and #crypto stocks were making lower lows, the sentiments changed with the news of one of the world’s largest asset managers, BlackRock, filing for a Bitcoin Spot Exchange-Traded Fund (ETF). But analysts at Berenberg Capital believe that the BlackRock ETF rally is short-lived.

50% Downside for Coinbase Stock?

Berenberg believes COIN investors should curb their enthusiasm arising from BlackRock filing for a spot Bitcoin ETF with Coinbase as a custody partner. After BlackRock’s ETF filing on June 15, the price of COIN surged over 40%, even outperforming Bitcoin’s price action.

Berenberg Capital highlights some risks that could give “rise to negative headlines.”

Potential cease and desist order on staking program looming.

The downside from the potential loss of staking revenue looks much larger than the potential upside from the custody role of BlackRock ETF.

Risk to revenue from interest income from USDC.

Along with the Securities and Exchange Commission’s (SEC) lawsuit, over 10 states, including California and New Jersey, have asked #Coinbase to halt its staking services. Berenberg believes that if the states issue a cease and desist order, it could cause a big dent in Coinbase’s revenue.

What are the best alternatives to Coinbase for trading crypto? Click here to learn more.

The analysts estimated that the potential downside from staking revenue loss is much higher than the potential upside in revenue from Coinbase serving as a custody partner for a BlackRock ETF.

Furthermore, Berenberg analysts also anticipate a risk to revenue from the interest income from #USDC . They wrote in the report:

“Logical arguments can be made in support of the notion that stablecoins are securities, and that it is therefore feasible that the SEC could embrace such arguments and use them as the basis for regulatory actions.”

Due to these factors, Berenberg gave a target of $39 for #COIN .

A Risky Short

As of writing, COIN is trading at $73.30 on pre-market. Although the target is around 50% down from the current price, the analysts gave a “Hold” ranking to Coinbase stock. Berenberg analysts explain:

“We believe shorting the company’s share outright represents a risk strategy, especially as the stock could be prone to abrupt upside moves as the company pushes through the legal gauntlet that lies ahead of it.”

The chart below shows that COIN has been trading range-bound from $84 to $50 in 2023. For the stock to continue its rally, it would need a decisive weekly close above $84. Similarly, a weekly close below $50 might result in a downward trend.

Chart of Coinbase Global, Inc. in the weekly timeframe. Source: TradingView

$USDC $SOL $ETH

Coinbase has disclosed that it received a “Wells notice” from the US Securities and Exchange Commission (SEC). This is a formal notification that the regulator’s staff is recommending an enforcement action against the company for possible violations of securities laws.

Coinbase has revealed that the Wells notice relates to an unspecified portion of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet. However, the notice does not require any changes to the company’s current products and services.

The notice comes after Coinbase provided multiple proposals to the SEC regarding registration, all of which were refused by the regulator. Despite over 30 meetings with the SEC over nine months, Coinbase claims that they were doing all the talking and the SEC provided no feedback. Furthermore, Coinbase has repeatedly invited the SEC to raise any questions about any asset on its platform but none were raised.

The investigation is still in its early stages, and the SEC has not disclosed any specific concerns about a single asset on Coinbase’s platform. Coinbase claims that the SEC’s decision to issue a Wells notice is unusual given that its staking and exchange services are largely unchanged since 2021 when the SEC reviewed its S-1 and allowed the company to become a public company.

Coinbase has repeatedly called for the development of a regulatory framework for cryptocurrencies and submitted a petition for rulemaking last summer. The company argues that regulatory uncertainty in the crypto industry is getting worse, and the SEC’s continued regulation by enforcement only exacerbates the problem.

The situation with Coinbase is not unique. Even courts have questioned the SEC’s inconsistent positions and lack of guidance to the industry. Federal Bankruptcy Judge Michael Wiles recently made a ruling against the SEC that stated: “Regulators themselves cannot seem to agree as to whether cryptocurrencies are commodities that may be subject to regulation by the CFTC, or whether they are securities subject to securities laws, or neither, or even on what criteria should be applied in making the decision. This uncertainty has persisted despite the fact that cryptocurrency exchanges have been around for a number of years.”

Coinbase maintains that it is confident in the way it runs its business and welcomes the opportunity for Coinbase and the broader crypto community to get clarity in court.

#SEC #Coinbase #COIN #CFTC #azcoinnews

This article was republished from azcoinnews.com

Coinbase has conducted an experiment to assess the accuracy of the artificial intelligence language model, ChatGPT, developed by OpenAI, in detecting security vulnerabilities in smart contracts.

The Blockchain Security team at Coinbase compared ChatGPT’s risk score results for 20 smart contracts to those obtained from a manual security review, with the goal of determining whether ChatGPT could be integrated into the security review process. The test revealed that ChatGPT produced the same results as the manual review 12 times. However, in the remaining eight cases, ChatGPT failed to identify a high-risk asset, and five of these were labeled low-risk.

ChatGPT is a promising tool for improving productivity across a wide range of development and engineering tasks, including optimizing code and identifying vulnerabilities, among other things, based on the prompts it is given. However, while ChatGPT shows potential for quickly assessing smart contract risks, it does not meet the accuracy requirements needed to be integrated into Coinbase’s security review process.

The Blockchain Security team leverages in-house automation tools developed to aid security engineers in reviewing ERC20/721 smart contracts at scale. To test ChatGPT’s ability to review security risks in smart contracts, the team fed the tool with a prompt that specified the risk review framework to be used to compare the results to those obtained from the manual review. However, the team noted that ChatGPT did not have the context or information required to perform a response that could be compared to the manual review. Therefore, Coinbase had to teach ChatGPT to identify risks according to the security review framework.

Prompt engineering, a developing AI field, played a significant role in ensuring ChatGPT produced the intended results. The team had to articulate how the task should be performed or handled to obtain the intended results. Using the prompt engineered by Coinbase, ChatGPT produced risk scores that were used to compare the tool’s accuracy to that of a manual review.

Despite the efficiency of ChatGPT, the experiment revealed some limitations that impair the tool’s accuracy. ChatGPT is incapable of recognizing when it lacks context to perform a robust security analysis, resulting in coverage gaps where additional dependencies go unreviewed. An initial triage would be required to scope the review for the tool each time to prevent coverage gaps. ChatGPT is also inconsistent, as the same question may receive different answers, and the tool can be influenced by comments in the code.

Finally, OpenAI continues to iterate on ChatGPT, and Coinbase is optimistic that future versions of the tool may be more effective in identifying security vulnerabilities in smart contracts.

#Coinbase #COIN #ChatGPT #AI #azcoinnews

This article was republished from azcoinnews.com

Cathy Wood, the CEO of ARK Invest, has made headlines recently with her comments on Bitcoin and the role of institutional investors in the cryptocurrency market.

Speaking on Bloomberg TV on March 21st, Wood expressed her belief that Bitcoin’s price hikes following the banking crisis will attract more institutional investors to the digital asset.

Wood argued that institutional investors should allocate between 2.5% and 6% of their assets to digital assets, a similar percentage to what they have historically allocated to new assets. She emphasized that Bitcoin behaves differently than the stock market, which makes it a valuable asset for portfolio diversification.

The ARK Invest CEO also commented on the recent trend of corporate finance departments holding Bitcoin on their balance sheets, noting that regulatory pressure has forced many companies to stop this practice. However, Wood believes that this trend will eventually resume as more institutional investors enter the market.

In a recent investment memo, ARK Invest highlighted the role of cryptocurrencies, including Bitcoin, as “safe havens” during times of market volatility. This is a significant departure from the traditional view of cryptocurrencies as risky and volatile investments.

Despite her bullish stance on Bitcoin, ARK Invest has recently sold shares of crypto exchange Coinbase (COIN). On Tuesday, March 22nd, ARK sold 160,887 shares of COIN, worth $13.5 million. This comes after a series of buys of Coinbase’s stock during the crypto winter of 2022. Throughout the year, COIN underperformed both Bitcoin and Ether, and its shares dropped 86%.

ARK’s most recent purchase of COIN was in early March when the company acquired over 350,000 shares of Coinbase, valued at $22 million. Year-to-date, COIN is up nearly 150%, closing the Tuesday trading day in the U.S. at $83.99. However, the stock is still down 54% over the last calendar year, having been listed in April 2021 at $342.

Despite the recent sale of COIN shares, ARK Invest has also announced the launch of a new private crypto fund, raising $16 million to invest in digital assets. This demonstrates the company’s continued confidence in the long-term prospects of the cryptocurrency market.

As institutional investors continue to enter the digital asset space, the role of Bitcoin and other cryptocurrencies in portfolio diversification is likely to become more significant. Cathy Wood’s comments on this topic are just one part of the ongoing conversation around the future of cryptocurrencies and their place in the global financial system.

#ARK #Cathywood #Coinbase #COIN #azcoinnews

This article was republished from azcoinnews.com