Coinbase shares tumbled on Friday amid the possibility of contagion following the cryptocurrency exchange FTX crisis. Cryptocurrency analysts warn that negative trading volumes may continue. However, many analysts expect declines to occur until confidence returns.
Confidence in the cryptocurrency industry has taken a serious hit
Jason Kupferberg of Bank of America shared a note with customers on Friday morning. He downgraded Coinbase shares from buying to neutral with the phrase “according to the consequences of the FTX collapse.” Kupferberg gave the stock a target of $50. It is only 8 percent above current levels. It’s currently $46 per share, 54 percent lower than its previous target of $77.
Kupferberg also said:
We don’t think COIN is just another FTX, but fallout is likely. It creates new headwinds for Coinbase that require additional attention.
The analyst says the bankruptcy of a major competitor could help Coinbase gain market share in the long run. However, the analyst worries that the “risk of contagion” of FTX may continue. He points out that some users are selling their holdings to “leave cryptocurrencies completely.” He adds that other investors are on the move. Investors take their cryptocurrencies off the exchanges and put them in their cold wallets.
Analyst Dolev says crypto industry is getting worse
Mizuho analyst Dan Dolev states that daily trading volumes are about 35 percent below their annual average. He said that this “points to investors who have suffered losses” in the “deteriorating” cryptocurrency industry. Mizuho gives Coinbase a price target of around 10 percent below current prices, or $42.
Coinbase CFO Alesia Haas acknowledged the risk of contagion Wednesday. He then made a statement to the Wall Street Journal. Haas said in a statement:
The consequences of the FTX crisis are much more similar to the financial crisis of 2008, when it exposed malpractices and poor risk management. It can take weeks to understand the extent of the FTX effect.
As we have reported as Kriptokoin.com; Coinbase shares fell 5 percent on Friday. It has dropped nearly 12 percent since the onset of the FTX crisis. This year, its stock has seen losses as high as 81 percent. It is stated to be much worse than the 30 percent decline of the Nasdaq.
Leading cryptocurrency Bitcoin and leading altcoin ETH saw drops
Bitcoin remained stable for 10 consecutive days above the $16,000 support during the FTX crisis.
Bitcoin (BTC) is down 0.49 percent in the last 24 hours. BTC is currently trading at $16,661. Ethereum (ETH) continues to trade at $1,209. It also appears to have remained stable since Thursday. In the past seven days, BTC and ETH have fallen by 1.5 percent and ETH by 4.8 percent, respectively.
Data released by Coinbase Institutional on Friday shows the resistance of BTC and ETH in recent days. It is stated to act as a buffer for potential mass purges. David Duong, Head of Institutional Research at Coinbase, and Brian Cubellis, Research Analyst, made statements. Duong and Cubellis say:
The recent performance of these 2 cryptocurrencies is not crypto-focused due to the nature of events at FTX. It may reflect the implicit acknowledgment that things are strictly credit driven.
FTX crisis created a domino effect on cryptocurrencies
That said, other crypto analysts point out the continued domino effect following the fallout from FTX. Analysts argue that its impact is still difficult to measure. Crypto market capitalization has dropped below $800 billion, its lowest level since the start of 2021.
Crypto-asset trading firm QCP wrote on Telegram on Friday that BTC and ETH are not receiving any post-CPI impact. The firm said this about its poor performance across all cryptocurrencies:
It will probably stay until the new year until much of the uncertainty is cleared. This completely changes our previous view of the four year-end macro rally wave to be led by ETH.
Despite the dips, BTC investors continue to buy
Despite the overall bearish trend, on-chain data from crypto data and analytics firm IntoTheBlock shows that BTC long-term holders have increased their holdings by 180,000 BTC since the collapse of FTX, close to $3 billion.
Lucas Outumuro, head of research at IntoTheBlock, said that historically long-term BTC holders have “accumulated strongly in a bear market” and “started selling after all-time highs.” Outumuro also says:
Bitcoin, based on on-chain data, I would say that’s probably the main strategy they’re looking to recreate.
