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HomeMarketCoinbase Leads Crypto Stocks Lower as FTX Collapse Leads to Confidence Crisis

Coinbase Leads Crypto Stocks Lower as FTX Collapse Leads to Confidence Crisis

BofA Securities analyst Jason Kupferberg downgraded shares of Coinbase to Neutral from Buy.

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Tiffany Hagler-Geard/Bloomber

Coinbase Global
and other crypto-related stocks were declining Monday as the price of
Bitcoin
fell amid the continued fallout from the collapse of crypto platform FTX.

The price of Bitcoin, the world’s largest cryptocurrency, has fallen 2.6% over the past 24 hours to $16,132. The decline of Bitcoin comes after FTX filed for bankruptcy earlier this month, and its founder and Chief Executive Sam Bankman-Fried resigned. FTX’s new CEO, John J. Ray III, said in a filing that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

FTX said in a bankruptcy filing on Saturday that it owes its 50 largest creditors around $3.1 billion.

The collapse of FTX has caused some traders to lose confidence in and question the legitimacy of digital currencies. That could be a problem for crypto trading platforms and other crypto-related stocks.

Coinbase (ticker: COIN) tumbled 4.6% in premarket trading Monday, while
Marathon Digital Holdings
(MARA) dropped 4.5%,
Riot Blockchain
(RIOT) fell 3.7%,
MicroStrategy
(MSTR) declined 2.6%, and
Bit Digital
(BTBT) was down 2%.

Even though a large competitor has been eliminated from the space, which gives Coinbase the ability to gain market share over the long-term, BofA Securities analyst Jason Kupferberg wrote Friday that the stock’s decline in the near-term has only just begun.

“Diminished confidence in the crypto ecosystem (especially among retail crypto users) is likely to dampen overall trading activity,” Kupferberg said. “In the wake of the FTX news, transaction volumes spiked, but we expect this to be fleeting as some users sell their assets to leave crypto entirely and others move their crypto assets off exchange and into cold storage.”

Kupferberg added that any near-term government regulations on crypto will now most likely be delayed amid the FTX fallout, and the full impact of this situation will most likely take weeks before its fully understood. He downgraded shares of Coinbase to Neutral from Buy on Friday and cut his 12-month price target to $50 from $77.

Write to Angela Palumbo at angela.palumbo@dowjones.com

Credit: marketwatch.com

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