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Coinbase sees another hit with Moody’s downgrades, but hopes are still high

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  • The rating service Moody’s and the financial services firm Berenberg Capital downgrade Coinbase while advising the investors to overlook its coins for the time being. 

The SEC’s litigation on Coinbase is throwing a challenge toward the exchange every day. In what could be seen as a direct impact of the lawsuit, Credit ratings agency Moody’s has downgraded the exchange’s ranking. From ‘stable’, Coinbase has come down to ‘negative’ which makes it less reliable to investors and crypto users.

The cascading effects of SEC’s crackdown

On June 8, Moody’s released a statement explaining the reasons behind this. It said that the step was taken in light of the SEC’s action and its impact on the exchange’s operations.

However, the rating service mentioned that Coinbase maintains a firm liquidity position in the markets. It gave positive feedback on the exchange’s reserves which stand at $5 billion in cash and other assets that have an overall value of $3.4 billion.

Suggesting the course of action for the exchange, Moody’s said that it should focus on expense management right now. Lately, this has caused the same issues in the transaction revenue. 

Notably, Moody’s isn’t the only one that debased Coinbase after SEC’s legal lashing on it. Berenberg Capital, a financial services firm cut its price target for COIN shares from $55 to $39. It gave an email statement to Cointelegraph telling the reason behind this move. Its research analyst Mark Palmer explained that the decrease in price target shows an already-weakened performance getting hit by SEC’s charges. 

The statement tells that Coinbase’s Q2 trading volumes were down due to many other reasons. In addition to that, Palmer hinted at a possible fix to this particular problem. He suggested that the exchange should discontinue the services like staking. Furthermore, he said that investors should abstain from putting money into Coinbase’s shares in the short term.

Some investors are still hopeful

However, his views are at variance with those of ARK Invest CEO Cathie Wood. In an interview with Bloomberg, Wood said that Coinbase isn’t the only exchange engaged in a legal tussle with SEO. Binance is also under the regulatory scanner and this would benefit Coinbase in the long run.

It should be noted that ARK Invest is the fourth-largest holder of Coinbase shares. Moreover, it bought an additional lot of COIN that is worth $21.6 and the firm seems quite confident about their investment in the exchange.

Based on the data released by Google Finance, Coinbase shares are on a descent since the beginning of this week. They have seen a 15.7% decrease in their value and are now available for $54.90 per piece.   

Conclusion

The SEC’s legal actions have taken a toll on Coinbase’s operations. While it’s hard to say how long it’ll stay, the crypto community is hoping that it would be over soon. It is good to see that some investors have put their faith in the exchange even in this time of trouble. We can just hope that the clouds of gloom are soon over for it. 

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