Goldman Sachs Calls a Truce: Upgrades Coinbase to Neutral

The Impact of Rising Cryptocurrency Prices on Exchanges

The current surge in cryptocurrency prices is proving to be a major source of success for exchanges. With increased retail participation, these exchanges are experiencing record-breaking daily volumes similar to those seen during the 2021 bull market.

Goldman Sachs (GS) recently reversed its bearish stance on Coinbase (COIN), upgrading its rating to neutral from sell. This change is attributed to the record-high prices of bitcoin (BTC) and the rise in daily trading volumes. According to a report published by the bank on Thursday, Goldman also raised its price target for Coinbase shares to $282 from $170. As of now, the shares are trading at $242.10 in premarket trading.

In their analysis, led by Will Nance, the analysts at Goldman noted that while there may still be limited use cases for crypto, the stock’s significant increase is due to the surge in crypto prices and Coinbase’s focus on managing consistent profitability. This has overshadowed any potential lack of acceleration in retail adoption over time.

The impact of rising cryptocurrency prices on exchanges, particularly on Coinbase, is evident in the company’s daily volumes, which have reached an impressive $3 billion to $5 billion range as bitcoin surpassed $67,000. The bank’s research shows that this growth is primarily driven by increased retail participation, which has resulted in attractive take rates for COIN.

In addition to this, Coinbase is benefitting from a variety of fundamental factors such as its basic trading platform, maintaining market share, commitment to cost management and profitability, and the tailwinds from higher interest rates caused by COIN’s 50% revenue share of interest income earned from USDC reserve balances.