The cryptocurrency market is experiencing a little bit of a resurgence at first of 2023, a welcome improvement given how unfavorable final yr was for the complete business. Macro headwinds, traders in search of safer property, and failures and bankruptcies deserve the credit score for the huge lack of worth in 2022.
However this hasn’t stopped market observers from remaining optimistic, particularly BTIG analyst Mark Palmer. Based on him, Coinbase (COIN 15.75%), a high crypto inventory, has 100% upside. Let’s take a better take a look at why he is so bullish on this cryptocurrency brokerage and change operator.
Coinbase as a trusted entity
As of Jan. 20, Coinbase’s inventory was at $55, that means a 100% rise interprets to a $110 worth goal. Often, Wall Road analysts attempt to predict the place shares might be 12 months out. If Coinbase hits this goal by yr’s finish, that will surely enhance investor portfolios.
The reasoning behind his forecast is fairly easy. Palmer views Coinbase as a “protected haven” for these seeking to spend money on digital property. Definitely, this is smart once you consider what occurred final yr. The occasion that is in all probability most pertinent in readers’ minds is the entire blowup of FTX, which on the time was the fourth largest crypto change on the planet.
It was found that FTX was utilizing shopper property that have been deposited in brokerage accounts to lend cash to its sister group and hedge fund, Alameda Analysis. This was an enormous crimson flag, and it shined mild on the complexity and opaqueness that also exists within the business. FTX has since declared chapter, and its as soon as billionaire founder, Sam Bankman-Fried, has run into hassle with the regulation.
Consequently, Palmer believes Coinbase will achieve market share through the present crypto market downturn. Since its founding in 2012, Coinbase has emphasised security and safety above all else. This goes a great distance in it being one of the trusted platforms within the area.
Palmer additionally factors to how Coinbase, as a U.S.-listed public firm, will need to have its financials audited. This leaves little room to cover any shenanigans which may come on the expense of shoppers or traders. And it gives peace of thoughts to all stakeholders.
Take it with a grain of salt
At a excessive degree, Palmer’s evaluation makes full sense. As extra customers enter the crypto economic system, wanting to purchase and promote Bitcoin, Ethereum, or an enormous variety of different tokens, Coinbase stands to profit by hopefully attracting extra of those new prospects than current rivals because of its standing as a protected haven.
And it will result in the potential for better income. That is one thing the enterprise desperately wants, as gross sales by way of the primary 9 months of 2022 dropped 52% yr over yr, with Coinbase posting a internet lack of $545 million in the latest quarter, ended Sept. 30.
Nonetheless, I urge readers to take any analyst’s worth goal with an enormous grain of salt. I am all the time weary of anybody who thinks they know the place a inventory will go within the subsequent 12 months, which is such a short while interval. Actually something can occur, and there are just too many unknowable variables at play that may have an effect on not solely an organization’s underlying elementary efficiency, however its inventory worth as effectively.
This dynamic is much more pronounced when coping with the cryptocurrency market. Sure, I agree with Palmer’s basic evaluation. Coinbase may entice extra customers onto its platform sooner or later, and thus achieve market share, because of the string of high-profile blow-ups within the business that spotlight how its enterprise is best from a fiduciary perspective.
However for Coinbase shares to hit $110, the complete crypto market will most certainly have to see its worth soar rapidly. And if we all know something from learning the latest previous, it is that nobody is aware of the place crypto asset costs are going, particularly not within the close to time period.
traders ought to monitor Coinbase’s progress, notably because it pertains to consumer progress, beginning with the corporate’s This fall 2022 earnings announcement subsequent month.