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Analyst

The investment bank downgraded Coinbase stock to "Neutral" amid the exchange's ongoing battle with U.S. regulators.

Crypto exchange Coinbase’s stock price will continue to be “weighed down” until regulators establish the legal “rules of the road” in the United States, according to investment analysts from Citi.

As per reports on May 1, the investment bank downgraded shares of the crypto exchange from “Buy” to “Neutral” and lowered its price target — citing “too many unknowns” as the company battles it out with regulators.

*Screenshot of the analyst note from Citi. Source: Twitter*

"Until the regulatory 'rules of the road' are better established in the U.S., the stock will remain weighed down by this high level of uncertainty," Citi analyst Peter Christiansen wrote in a May 1 note.

In March, Coinbase disclosed it had received a Wells notice from the Securities and Exchange Commission (SEC) over possible violations of securities laws — signaling possible future enforcement action.

In April, it shot back at the SEC, filing a federal court action compelling the SEC to give clarity into the regulatory treatment of certain digital assets.

Later in the month, Coinbase CEO Brian Armstrong and Chief Legal Office Paul Grewal released a public response to the March Wells notice on YouTube.

1/ Today we’re sharing our “Wells response” to the SEC. As part of our response, @iampaulgrewal and I sat down to explain why we’re confident in the facts and on the law, and why a Wells notice is not in the best interest of the US. https://t.co/zkNaWGgtcK
— Brian Armstrong ️ (@brian_armstrong) April 27, 2023

“As it stands, both long and short debates begin and end with Coinbase's regulatory predicament,” said Christiansen, noting there could be a few ways the regulatory scuffle could play out:

“Clarity could come from: (i) a lengthy legal process vs. the SEC, where the possibility of an operating injunction cannot be ruled out, (ii) long-awaited legislative movement amidst a challenging legislative calendar and an upcoming election year, and/or even (iii) Ripple’s ongoing legal process, which could be potentially precedent setting,” the analyst wrote.

The analyst noted that the latest SEC developments don’t suggest that the parties are close to any resolution.

At the time of writing, Coinbase is trading at $51.32, down 58.5% over the past year, as per Yahoo Finance.

*Coinbase share price over a year period. Source: Google*

Itsstock price slumped around 16% on March 22 after it disclosed it received the Wells notice.

The company has recently become the target of two proposed class action lawsuits, one of which alleges it breached privacy laws in Illinois over its collection of customer biometrics, and the other alleging certain executives profited from insider information when the company went public.

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MicroStrategy CEO reiterates ‘long term’ Bitcoin play in Q3 earnings

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Analyst

The world’s largest corporate holder of Bitcoin has reduced its losses compared to previous earnings as its CEO says it will continue to buy and hold Bitcoin long term.

The third quarter earnings for business intelligence firm MicroStrategy revealed a narrowed net loss of $27.1 million for the quarter, while it continues to grow its Bitcoin (BTC) portfolio despite poor crypto market conditions.

The world's largest publicly traded corporate Bitcoin owner confirmed it still owns 130,000 BTC at the end of Q3 2022. That amount represents 0.62% of all Bitcoin that will ever be owned, which it says was acquired for a total cost of around $4 billion, or $30,639 per BTC.

The company reported on Nov. 1 impairment charges for the quarter of $727,000, far less than the $917.8 million it recorded in the second quarter of 2022 or the $65 million for the same period last year, thanks to stable Bitcoin prices throughout the last quarter.

An impairment charge is an accounting term used by businesses to describe a reduction in the value of held assets, and according to MicroStrategy, it had cumulative impairment losses of approximately $2 billion as of Sept. 30.

In an earnings call MicroStrategy president and CEO, Phong Le reiterated the firm's long-term hodling strategy, saying:

“We have not sold any Bitcoin to date. To reiterate our strategy, we seek to acquire and hold Bitcoin for the long term. And we do not currently plan to engage in sales of Bitcoin. We have a long-term time horizon and the core business is not impacted by the near-term Bitcoin price fluctuations.”

Michael Saylor, who stepped down from his position as CEO on Aug. 8 but remains with the company as an executive chairman, mentioned in the call that since embarking on its Bitcoin strategy on Aug. 11, 2020, the company's share price was up 116% compared to Bitcoin’s 72% increase for the same period.

In the accompanying earnings report, chief financial officer Andrew Yang gave a nod to the recent announcement from the United States Financial Accounting Standards Board’s decision to support “fair value accounting” for Bitcoin, noting:

“If finally adopted and implemented, we believe fair value accounting will improve upon the current, unfavorable intangible accounting treatment applicable to Bitcoin holdings and will promote additional institutional adoption of Bitcoin as an asset class”

MicroStrategy reported adjusted earnings per share losses of $0.96, compared to analyst estimates of a loss of $0.94, and its revenues of $125.4 million surpassed estimates by just 0.05%.

The firm's revenues over the past year have reached $119.3 and $122.1 million respectively for Q1 and Q2. $16.4 million of its Q3 revenue came from its subscription services, which represents a 51% increase compared to the year prior in what is the fastest-growing source of revenue for MicroStrategy.

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