Coinbase Stock Drops, But Wall Street Analysts Remain Bullish: Election Outcome Could Propel Crypto Market

Coinbase Stock Drops, But Wall Street Analysts Remain Bullish: Election Outcome Could Propel Crypto MarketWhile Coinbase Global's latest earnings report came in weaker than expected, many Wall Street analysts still believe the stock is a buy, given that the upcoming election next week could have a significant impact on the cryptocurrency market.The operator of the largest U

Coinbase Stock Drops, But Wall Street Analysts Remain Bullish: Election Outcome Could Propel Crypto Market

While Coinbase Global's latest earnings report came in weaker than expected, many Wall Street analysts still believe the stock is a buy, given that the upcoming election next week could have a significant impact on the cryptocurrency market.

The operator of the largest U.S. cryptocurrency exchange released its third-quarter earnings late Wednesday. Trading revenue was weighed down by depressed cryptocurrency prices and a historically weak quarter for digital assets. Coinbase also warned that a drop in Ethereum's price in October could offset growth in non-trading revenue this quarter. Coinbase's shares fell as much as 8.6% in early trading Thursday, reaching a low of $193.56.

However, more optimistic analysts said Coinbase showed signs of a rebound this quarter, especially with Bitcoin nearing a breakout to record highs this week. Additionally, the post-election outlook for crypto will be clearer, regardless of which party controls the White House and Congress.

"While we continue to see operational progress, we believe that a bigger near-term catalyst could be the regulatory environment shifting due to the US election," Joseph Vafi, an analyst at CanaccordGenuity, said in a note late Wednesday. "It is a consensus view that crypto could get a positive boost, regardless of who wins the White House."

The election result has been widely seen as a key catalyst for the price of Bitcoin. Now, with Bitcoin's strong performance driven by increased demand, slowing supply, and expectations for ongoing interest rate cuts market uncertainty will decrease, which could help push up prices.

Moreover, federal legislation will unlock state-level expansion opportunities for Coinbase and could provide more pricing power for its retail trading business. "Certain states have imposed restrictions on staking, while the federal debate continues on the technology ... but increased federal clarity in this area could help reverse these state decisions," Peter Christiansen, an analyst at Citigroup, said in a note early Thursday.

Christiansen also pointed to "potential growth in Coinbase's business under a new administration including increased trading revenues from the acceptance and trading of stablecoin pairs, more fee-based revenue from staking adoption, and greater payment volumes as bank and payments partners expand."

Both Citi and CanaccordGenuity have a "buy" rating on Coinbase. Coinbase's subscription and services revenue including stablecoins, staking, and leveraged services offered to Prime traders declined sequentially in the third quarter but increased 66% year over year.

During the earnings call, CEO Brian Armstrong said he expects "the most pro-crypto Congress ever" next year.

However, PiperSandler, which has a neutral rating on the stock, said it needs to see more progress on the regulatory front before it gets more bullish. "We remain confident in COIN's ability to be a long-term leader in the crypto space, but significant regulatory clarity remains elusive in many facets of COIN's US operations," PiperSandler analyst Patrick Moley said in a note.

Bank of America also maintained its neutral stance, noting that "the current macroeconomic and regulatory environment is becoming increasingly favorable for crypto, providing a tailwind for market value growth and trading volumes," but SEC litigation against crypto companies and Coinbase's reliance on trading revenue remain potential negatives.