Following the recent U.S. district court ruling indicating that Ripple’s XRP token, when sold via an exchange or through programmatic sales, need not be classified as a security, sentiment is positively shifting. Notably, this can in principle de-risk the regulatory pressure on Coinbase shares, accordingly to analysts John Todaro and Daniel Lehmann. In fact, they envisage a positive spill-over impact on their stock, since Coinbase’s regulatory overhang could moderately diminish following the court ruling in Ripple’s favour.
Indeed, it’s a refrain often heard: The weight of regulatory pressure can considerably affect the share price. Thus, the court ruling acts as a harbinger for good news, at least for Coinbase, and other possible token sales through exchanges.
Interestingly, not only did the analysts maintain their buy rating on Coinbase shares, but they also took a step further by raising their price target to $120 from $70. Despite trading marginally lower in Friday’s pre-market trading, Coinbase shares witnessed a boom, closing 25% higher on Thursday in response to the Ripple court ruling.
Furthermore, the buzz around potential Bitcoin ( BTC ) exchange-traded-fund (ETF) applications is gaining momentum. Particularly, recent submissions from considerable traditional financial institutions, that utilize Coinbase for various services, amplifies the overall support and comfort for the ecosystem and Coinbase.
However, it is prudent not to get overly excited. Analysts at Needham subtly caution about the unpredictable crypto market. While they have modestly elevated their second-quarter 2023 earnings estimates for the crypto exchange, they also highlight potential worry spots. A further slide in retail trading might lead to leaner volumes for the quarter.
Indeed, this sentiment is echoed more strongly by the German investment bank Berenberg. Their analysts argue that the rally in Coinbase shares in the aftermath of the court’s decision could well be unwarranted.
In essence, though the court ruling gives some reprieve from regulatory pressures, it’s essential to remember the inherently volatile nature of crypto markets. The cautious optimism surrounding the Coinbase shares precisely captures this delicate balance between bullish anticipation and the inherently fluctuant state of crypto trading. Despite the upsides, expecting constant highs would be exaggerating the scenario. It seems that even in this brave new digital world, the age-old wisdom of ‘hope for the best, prepare for the worst’ holds true.
Source: Coindesk
