By Senad Karaahmetovic
As the cryptocurrency market attempts to stage a rebound after a substantial selloff in recent days, Wall Street analysts are discussing the implication of the FTX collapse on publicly traded companies with high exposure to the digital asset market.
Coinbase (NASDAQ:COIN), the largest publicly traded cryptocurrency exchange, saw its shares plunge by over 20% this week after analysts said the FTX collapse presents a "major red flag" for the company's business.
However, Bank of America analysts said the situation around FTX is actually evidence that Coinbase's simple but effective risk management approach is working. They also see an opportunity for the company to increase its market share as one of its biggest competitors is eliminated.
"The FTX event may increase the likelihood of more restrictive regulation for digital asset trading platforms and could lead digital asset trading volumes, which contributed 64% of Coinbase's Q3 revenue, to decelerate over the near-term," analysts wrote in a note.
Citi analysts lowered the price target to $80 per share from $105 to reflect lower crypto prices. It is now clearer than any time before, the analysts argue, that the crypto industry's growing pains remain a chief concern for investors, consumers, and market participants.
"We do think this event increases the sense of urgency for legislative action, which likely helps to level the playing field, encourages increased institutional adoption, and perhaps establishes legitimacy for trusted players focused on sustainability regardless of the crypto season," the analysts said.
At 09:35 ET (14:35 GMT), Coinbase shares trade 11% in the green.