Citi, a leading investment bank, has recently upgraded its stock rating for the cryptocurrency exchange Coinbase to ‘buy’ from ‘neutral’, setting a new price target of $345. This adjustment reflects a series of optimistic developments in the political and regulatory landscape within the United States, which could significantly benefit the crypto industry.
Influences from the Political Sphere
The revision in Coinbase’s stock outlook coincides with shifting dynamics in U.S. politics, particularly the upcoming election race. Former President Donald Trump, a Republican nominee, has prominently incorporated cryptocurrency into his campaign platform. Trump’s pro-crypto stance includes promises to halt what he terms the Biden administration’s “war on crypto,” oppose Central Bank Digital Currencies (CBDCs), and enhance protections for U.S.-based Bitcoin miners.
Supreme Court Decision’s Impact
Another pivotal factor in Citi’s revised outlook is the U.S. Supreme Court’s decision on June 28 to overturn the Chevron Defence Doctrine. This 40-year-old precedent allowed courts to defer to federal agencies’ interpretations of ambiguous laws, which has historically impacted regulatory approaches, including those affecting cryptocurrencies. The removal of this doctrine means that courts will now rely on their judgment to interpret statutes, potentially favoring entities like Coinbase in regulatory disputes.
Citi analysts highlighted that the Supreme Court’s decision casts doubt on the solidity of the SEC’s application of the Howey test, which is used to determine if an asset qualifies as an investment contract under securities laws. This development could be advantageous for Coinbase in its ongoing legal battles with the regulator.
Rising User Engagement and New Revenue Streams
The investment bank also pointed to growing user engagement on Coinbase’s layer-2 network, Base, and the potential financial uplift from the launch of spot Ether ETFs in the United States. These factors are seen as additional streams of income that could bolster Coinbase’s financial performance.
Citi’s analysts suggest that despite the aggressive enforcement actions by the SEC against crypto firms, the balance of power might be shifting in favor of companies like Coinbase due to the changing regulatory environment. They believe that the U.S. crypto market could “catch up” with the higher on-chain activity and liquidity that has been developing internationally.
| Factor | Description | Impact on Coinbase |
|---|---|---|
| Political Landscape | Pro-crypto stance by political figures | Positive |
| Supreme Court Ruling | Overturning of Chevron Defence Doctrine | Reduces regulatory ambiguity |
| Increased User Activity | Growth in user numbers on Coinbase’s Base network | Potential revenue increase |
| Launch of Spot Ether ETFs | New income source from ETFs | Enhances financial outlook |
Citi’s upgrade of Coinbase’s stock to ‘buy’ reflects a broader sentiment that the political and regulatory environment in the U.S. is becoming more favorable for the cryptocurrency industry. As the landscape evolves, the implications for Coinbase and similar entities could be profoundly positive, influencing their operational capabilities and market positioning.
Featured image credit: bruceg1001 via Freepik
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