(Bloomberg) -- A 62% rally in Coinbase Global Inc. shares this month is shining a spotlight on Wall Street euphoria around the largest US crypto exchange.
In the shadow of FTX’s Sam Bankman-Fried fraud conviction and revelations at Binance Holdings Ltd., traders are rushing to snap up shares in Coinbase on hopes that it’ll see an influx of business — especially if authorities approve exchange-traded funds that target Bitcoin.
That’s helped the stock more than triple in 2023, with November’s gains — which stand out even in this month’s pan-market rally — adding another $12 billion to the company’s market value. The shares are up this month by the most since January, pushing past $120 each to trade above the average analyst price target of about $84.
“Coinbase is in a better position today than really any other point as a public company,” said Needham & Co. analyst John Todaro, adding that 2022 and 2023 have been “shakeout years” for the industry. “Those who survived are going to come out of that stronger. And Coinbase is one that survived.”
Momentum has been building this year behind Coinbase thanks to clarity brought by the legal reckonings of competitors. The US Securities and Exchange Commission is also inching closer to green-lighting US-listed Bitcoin ETFs, with Bloomberg Intelligence anticipating approvals as soon as early January. Bitcoin has surged nearly 130% so far in 2023, including a roughly 9% jump in November.
For traders, those are all reasons for optimism after the company posted seven straight quarters of losses. Investors who’ve bet against Coinbase shares, by contrast, have racked up paper losses of $1.3 billion in the past 30 days, according to S3 Partners LLC data.
At the start of the month, jurors in New York found Bankman-Fried guilty of engaging in a massive fraud related to the collapse of his FTX crypto exchange. Then last week, Binance settled a major dispute with the US Department of Justice, agreeing to pay a $4.3 billion fine as chief executive officer Changpeng Zhao stepped down.
The silver lining, though, is that Binance is able to continue operations, removing an overhang for crypto and offering a positive boon for Coinbase, according to Oppenheimer & Co. analyst Owen Lau.
“A healthy development for the industry is positive for Coinbase, and an abrupt exit of large players is not,” he wrote in a recent note. “This settlement will likely uphold a high compliance standard for crypto exchanges, and force major players to invest in internal controls and make better disclosures.”
From here, it’s a question of whether the bulls can maintain momentum. More than 40% of Wall Street analysts that cover the company have a hold-equivalent rating, according to data compiled by Bloomberg.
Cathie Wood’s Ark Investment Management LLC sold more than 30,000 shares of Coinbase in the past month and more than 1.5 million shares in the quarter ending Sept. 30, according to filings. Ark is still the fourth-largest holder of Coinbase shares.
“I wouldn’t be surprised if maybe crypto takes a little bit of a breather,” said Needham’s Todaro, who has a buy rating and $120 price target for Coinbase. “But overall, we’re still kind of early innings of what feels like a new bull cycle.”
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