According to a recent investment report from Berenberg Capital Markets, the use of cryptocurrency by Hamas militants to finance recent attacks on Israel might have hindered Coinbase’s efforts in lobbying for cryptocurrencies in the United States.
In a research note dated October 18, Berenberg’s lead analyst, Mark Palmer, stated that his cautious stance towards Coinbase primarily stems from the regulatory actions taken against the company in the U.S. and the political challenges arising from the Israel-Hamas conflict.
The Financial Times reported last week that Israeli authorities shut down and confiscated over 100 accounts on Binance and other cryptocurrency exchanges that were aiding Hamas in their fundraising activities. As part of this crackdown, Israeli authorities seized millions of dollars worth of cryptocurrency.
Palmer noted that while Hamas had previously announced they would no longer use cryptocurrency for fundraising due to the traceability of transactions on blockchain ledgers, the recent headlines are likely to complicate the clarity regarding the legal status of cryptocurrencies even further.
In recent years, Coinbase has significantly increased its lobbying efforts in the U.S. as part of a strategy to promote more transparent and crypto-friendly regulations in the country.
Berenberg analysts reiterated their “hold” recommendation on Coinbase (COIN) stock and maintained a price target of $39.
At the time of publication, Coinbase shares were trading at $77.30, reflecting a 3% increase for the day, according to TradingView data.
Palmer expressed a cautious outlook on COIN, particularly after the stock’s significant rise of over 112% this year compared to approximately 72% for Bitcoin and 29% for the tech-heavy Nasdaq. He stated that their “Hold” rating on COIN reflects the belief that the stock is not currently suitable for investment in the short term.
Palmer also mentioned that Coinbase’s ongoing case with the U.S. Securities and Exchange Commission may continue to affect any positive momentum in the company’s stock price.
While Palmer acknowledged weaker-than-expected trading volumes due to a “persistent crypto winter,” he stated that Berenberg had revised its estimate of the company’s consumer transaction revenue to $240.8 million from $210 million. This adjustment reflects the expectation that Coinbase’s consumer take rate will decline at a slower pace than previously anticipated.
Additionally, Palmer highlighted that Coinbase’s substantial cash balance provides the company with cushion and flexibility. He expects the management to continue reducing expenses and extending its runway in the future.
Considering these factors, along with the fact that shorting Coinbase shares outright represents a risky strategy due to the crowded nature of short positions, Palmer believes the stock could experience sudden upward movements as the company navigates its legal battle with the SEC.