According to CoinDesk: In a significant development for cryptocurrency markets, JPMorgan has downgraded the rating for U.S. exchange Coinbase (COIN) from neutral to underweight. This move is based on the predicted disappointment involving the Bitcoin ETF catalyst, which significantly uplifted crypto markets in the past year.
JPMorgan's research report, released Monday, articulates concerns surrounding the launch of spot Bitcoin (BTC) exchange-traded funds (ETFs). Despite a convincing bull-run fueled by the launch of these ETFs, 2024 could present a challenging scenario for investors and Coinbase, potentially reversing the positive tide.
Coinbase shares dropped 4.1% to $122.90 in premarket trading, following the announcement. The progression of this leading U.S. exchange with several vital initiatives isn't expected to cushion the possible fall due to the disappointment concerning Bitcoin ETFs.
The Securities and Exchange Commission's (SEC) approval, last month, of spot Bitcoin ETFs was perceived as a herald for a new cryptocurrency era. It promised increased mainstream money influx into crypto markets as it allowed investors access to the sector without owning the underlying assets.
However, the report flags potential disappointments, suggesting that reduced ETF fund flows could hamper enthusiasm, resulting in a potential cryptocurrency market slump. Bitcoin prices have already been under pressure, falling below $40,000, and further deflation is anticipated due to wavering ETF enthusiasm. This, in effect, could lead to lower token prices, trading volumes, and reduced ancillary revenue opportunities for platforms like Coinbase.
Coinbase's potential role as custodian, surveillance, and trading provider for spot Ether (ETH) ETFs is also mentioned in the report, assuming these ETFs gain approval. However, the fall in the price of the world's largest cryptocurrency since the approval of spot ETFs casts a shadow over this possibility.
JPMorgan emphasized that intensified selling pressure on Bitcoin, in part due to FTX's bankruptcy estate's dumping of $2 billion worth of the Grayscale Bitcoin Trust (GBTC) post its conversion to an ETF, continues to hamper the underlying digital asset's value.
