The collapse of FTX has widespread ramifications for the crypto industry, and Goldman Sachs Group Inc GS analysts say lower crypto prices and the potential for reduced investor confidence in the asset class will likely lead to lower volumes across the market.
The Coinbase Analyst: Goldman analyst Will Nance reiterated a Sell rating on Coinbase and lowered the price target from $49 to $41, saying that lower levels of crypto trading volume will affect Coinbase’s subscription and service revenues.
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The Coinbase Takeaways: Coinbase said it does not have significant exposure to FTX or its affiliated companies, and its balance sheet is highly liquid. This, married to the lack of proprietary trading activities, insulates the company from the ramifications of FTX’s collapse, Nance said in a Friday note.
The recent uptick in users on Coinbase — proven by technical glitches observed on the platform — is likely to be short-lived, as the lower level of crypto prices and reduced investor confidence in the asset class will likely lead to lower volumes, the analyst said.
“FTX was a leader in crypto markets, and we believe the collapse of FTX comes as a major surprise and will likely impact investor confidence in crypto markets,” he said.
The FTX events may give the policy-making process more urgency, resulting in tighter regulations of cryptocurrency exchanges, more stringent guidelines for the segregation of user funds and perhaps even caps on the amount of leverage utilized in the market, Nance said.
Photo courtesy of Coinbase.