TD Cowen says Coinbase could plunge over 45% as SEC battle continues

A protracted conflict with the US. According to TD Cowen, the Securities and Exchange Commission will have an impact on Coinbase stock in the near future.

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As the SEC pushes down on crypto banking, Stephen Glagola lowered shares of the company that operates the cryptocurrency exchange to underperform, citing a "incremental risk to operations."

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The SEC last week issued a Wells notification to Coinbase warning the business of potential violations of U.S. securities law, which led to the downgrading from TD Cowen. A Wells notice often comes before an official charge from of the agency and gives the defendant the chance to refute the allegations.

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He stated in a note on Friday that "COIN appears to be headed for litigation against the SEC." We anticipate that this will lead to a share price overhang and eliminate favorable [near-term] triggers like the ETH Shapella upgrading and a U.S. derivatives launch.

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The change in mindset, according to him, also reflects projected slowdowns in top line growth and dim prospects for a recovery in retail trading activity this year.

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In light of this configuration, Glagola kept his price objective on shares at $36 and predicted that they might decline as much as 46% from Thursday's closing and as much as 86% from the levels it closed at in 2022. The stock has increased by more than 90% so far this year.

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Reclassifying cryptocurrency assets as securities, he continued, could severely harm Coinbase and "exacerbate trading volume deterioration."

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Glagola believes that Coinbase's staking activities are in jeopardy as a result of Kraken shutting down its own staking business in an agreement with the SEC. Staking is a technique used by some investors to generate passive return on their cryptocurrency holdings by locking tokens up on the system for a set length of time, serving as a potential large revenue opportunity for exchanges.

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According to Glagola, a portion of Coinbase's subscription and service revenue would suffer from the forced shutdown of this company.