Coinbase Soars: Goldman Sachs Upgrades Rating as US Dominance Grows

Coinbase is riding a bullish wave, and Wall Street is taking notice. In a surprising move, Goldman Sachs upgraded the cryptocurrency exchange‘s stock rating from “Sell” to “Neutral,” accompanied by a new price target of $282. This shift underscores a significant change of heart, fueled by Coinbase’s recent dominance in the US market.

The upgrade coincides with a surge in trading volume on Coinbase, driven by the January launch of several spot Bitcoin ETFs in the US. According to blockchain analysis firm Kaiko, Coinbase has captured a whopping 60% share of the US crypto market, a stark contrast to its pre-ETF market share.

This dominance isn’t merely symbolic. Daily trading volumes on Coinbase have mirrored the broader crypto market rally, reaching levels not seen since 2021. Notably, on the day these Bitcoin ETFs began trading, Coinbase processed almost $5 billion in volume – exceeding any single day in 2023 and rivalling the volume witnessed during FTX’s bankruptcy last year (BitDegree data).

The recent Bitcoin price surge further propelled Coinbase volumes. Data from BitDegree and CoinGecko suggests the exchange shattered its record, processing a staggering $12 billion on March 6th. It’s worth noting, however, that Coinbase has experienced outages and displayed zero balances during periods of high volatility.

Goldman Sachs’ revised outlook extends beyond just a rating change. They’ve also upped their Coinbase revenue forecast by 48% since February, reflecting the exchange’s recent financial performance. Coinbase’s Q4 2023 profits of $273.4 million marked a stark turnaround from the $557 million loss a year prior. This positive trend continued into Q3 2023 with a reported profit of $2 million.

Goldman Sachs’ initial “Sell” rating stemmed from a cautious view of crypto’s long-term viability. Previously, they voiced concerns about the limited real-world use cases of crypto, questioning the sustainability of exchange growth. However, the recent upswing in crypto adoption and Coinbase’s market capture have prompted a reevaluation.

The new $282 price target signifies a more optimistic short-term outlook for Coinbase, aligning with the current market momentum. While Goldman Sachs remains neutral on Coinbase’s long-term prospects, the upgrade acknowledges the exchange’s capitalizing on the current crypto boom.

Coinbase’s dominance in the US market, coupled with its soaring trading volumes and improved financials, has persuaded Goldman Sachs to take a more measured stance. Though the long-term remains uncertain, the immediate future appears bright for the crypto exchange giant.