The recent use of cryptocurrency by Hamas militants to fund attacks on Israel may have negatively impacted Coinbase’s cryptocurrency lobbying efforts in the United States, according to a new investment report from Berenberg Capital Markets. In the report, lead analyst Mark Palmer expressed caution towards Coinbase due to regulatory actions and political headwinds resulting from the Israel-Hamas conflict.
Israeli authorities recently shut down and seized over 100 accounts on Binance and other crypto exchanges that were being used to aid Hamas in its fundraising efforts. This crackdown resulted in the seizure of millions of dollars worth of cryptocurrency. Despite Hamas previously stating that it would no longer use crypto for fundraising, the recent headlines surrounding the conflict are likely to create further ambiguity regarding the legal status of cryptocurrencies, wrote Palmer.
In an effort to encourage clear and crypto-friendly regulation in the United States, Coinbase has significantly increased its lobbying efforts. However, Berenberg analysts reiterated their “hold” recommendation on Coinbase stock and maintained a price target of $39. They view Coinbase through a cautious lens, particularly considering the stock’s substantial increase of more than 112% this year.
Coinbase shares were trading at $77.30, experiencing a 3% increase on the day, according to data from TradingView at the time of publication. Palmer stated that the ongoing case between Coinbase and the U.S. Securities and Exchange Commission (SEC) could continue to impact the company’s share price. He also mentioned weaker-than-expected trading volumes due to a “persistent crypto winter.” Despite this, Berenberg raised its estimate of Coinbase’s consumer transaction revenue to $240.8 million, reflecting a slower contraction of the company’s consumer take rate.
Palmer highlighted that Coinbase’s substantial cash balance provides it with flexibility and cushioning. He expects the management to continue reducing expenses and extending its runway moving forward. Consequently, Palmer believes that outright shorting of Coinbase shares represents a risky strategy, especially considering the potential for abrupt upside moves as the company progresses through its legal battle with the SEC.
In conclusion, the use of cryptocurrency by Hamas militants to fund attacks on Israel has prompted regulatory actions and political headwinds that may hinder Coinbase’s lobbying efforts. While the company aims for clear and crypto-friendly regulation in the United States, ongoing regulatory challenges and weaker trading volumes pose concerns. However, Coinbase’s large cash balance and cost-cutting measures provide some stability and potential for future growth.