The recent use of cryptocurrency by Hamas militants to fund attacks on Israel has hindered Coinbase’s crypto lobbying efforts in the United States, according to a new investment report from Berenberg Capital Markets. The report states that the regulatory actions and political headwinds resulting from the Israel-Hamas conflict are the primary reasons for Berenberg’s cautious stance towards Coinbase.
In October, Israeli authorities shut down and seized over 100 accounts on Binance and other crypto exchanges that were being used to aid Hamas in its fundraising efforts. This crackdown resulted in the seizure of millions of dollars worth of cryptocurrency. While Hamas had previously announced that it would no longer use crypto for fundraising due to the ability of authorities to track its movement on blockchain ledgers, the recent headlines have made clarity around the legal status of crypto even more elusive.
In response to the regulatory actions and political developments, Coinbase has significantly increased its lobbying efforts in the U.S. with the aim of promoting clear and crypto-friendly regulations. However, Berenberg analysts maintain a “hold” recommendation on Coinbase (COIN) stock and a price target of $39.
Coinbase shares were trading at $77.30, up 3% on the day, at the time of publication. Berenberg analysts view Coinbase through a cautious lens, particularly given the stock’s substantial increase this year compared to Bitcoin and the tech-heavy Nasdaq. They believe that the stock is uninvestable in the near term.
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The report also mentions Coinbase’s ongoing case with the U.S. Securities and Exchange Commission (SEC), which could continue to weigh on the company’s share price. Additionally, weaker-than-expected trading volumes resulting from a “persistent crypto winter” are noted. However, Berenberg raised its estimate of Coinbase’s consumer transaction revenue to $240.8 million from $210 million, reflecting an expectation that the consumer take rate will contract at a slower pace than previously anticipated.
Furthermore, the report highlights Coinbase’s large cash balance, which provides the company with cushion and flexibility. The analysts expect Coinbase’s management to continue reducing expenses and extending its runway in the future. They caution against shorting the company’s shares outright due to the crowded short position and the potential for abrupt upside moves as Coinbase navigates its legal battle with the SEC.
Overall, the report suggests that Coinbase’s crypto lobbying efforts in the United States may face challenges due to the regulatory actions and political headwinds resulting from the use of cryptocurrency by Hamas militants. However, the analysts acknowledge Coinbase’s financial strengths and expect the company to continue making strategic moves to address its legal and regulatory challenges.
