Bulletpoints:
• Investment firm Cowen downgraded Coinbase (COIN) stock to market perform from outperform, citing declines in trading volumes.
• The downgrade was attributed to the lack of clarity on a possible recovery in trading volumes following the collapse of FTX.
• Cowen also cut its price target on the shares to $36 from $75.

Coinbase, the cryptocurrency exchange, has seen its stock downgraded by investment firm Cowen, who cited a decline in trading volumes as the main reason for the downgrade. The downgrade was attributed to the lack of clarity on a possible recovery in trading volumes following the collapse of FTX, a rival exchange, in 2022.

The firm cut its price target on the shares from $75 to $36 and downgraded the stock to market perform from outperform. The stock was down 1.5% to $37.14 in premarket trading, having fallen 84% in the past year.

Analysts Stephen Glagola and George Kuhle wrote that Coinbase’s business is “significantly correlated to crypto asset prices, trading volumes and volatility”. The monthly trading volumes have been in decline since November 2021 and there is “low visibility” into a possible recovery in retail trading volumes in 2023 due to the macro backdrop and contagion risks on crypto asset prices.

The fallout from the collapse of FTX is likely to lead to stern scrutiny from the SEC, while depressed crypto valuations could cause muted retail trading activity. This has caused Cowen to be cautious in their outlook and downgrade the stock.

The cryptocurrency sector is still relatively new, so it is difficult to predict what will happen in terms of trading volumes. It remains to be seen whether Coinbase can recover from this latest setback and regain its position as one of the leading crypto exchanges.