The recent utilization of cryptocurrencies by Hamas for financing attacks against Israel has cast a shadow over Coinbase’s efforts to advocate for the cryptocurrency industry in the United States, according to a new investment report released by Berenberg Capital Markets.
In a research note published on October 18th, Berenberg’s lead analyst, Mark Palmer, attributed his “cautious stance” toward Coinbase to the array of regulatory challenges it is confronting in the U.S. He also highlighted the adverse political environment stemming from the Israel-Hamas conflict.
Last week, the Financial Times disclosed that Israeli authorities had taken action to close down and confiscate over 100 accounts on platforms like Binance and other cryptocurrency exchanges. These accounts were being exploited to support Hamas in its fundraising endeavors. As a result of this crackdown, Israeli authorities seized cryptocurrency assets worth millions of dollars.
Palmer stated, “While Hamas announced last April that it would no longer use crypto for fundraising due to the ability of authorities to track its movement on blockchain ledgers, we believe the recent headlines are likely to make clarity around the question of crypto’s legal status even more elusive.”
Over the past few years, Coinbase has significantly increased its lobbying efforts in the U.S., aiming to facilitate the introduction of more transparent and crypto-friendly regulations.
Despite these challenges, 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, marking a 3% increase.
Palmer expressed his reservations, stating, “We continue to view COIN through a cautious lens, especially after the stock has traded up by more than 112% this year versus ~72% for Bitcoin and ~29% for the tech-heavy Nasdaq.”
He further explained that Coinbase’s ongoing legal dispute with the U.S. Securities and Exchange Commission (SEC) could continue to cast a shadow over any positive momentum in the company’s stock price.
Although Palmer acknowledged weaker-than-expected trading volumes amid a “persistent crypto winter,” he disclosed that Berenberg had raised its estimate for the company’s consumer transaction revenue to $240.8 million, up from the previous estimate of $210 million.
Additionally, Palmer pointed out that Coinbase’s substantial cash reserves provide the company with flexibility, and he anticipates that management will persist in reducing expenses and extending its financial runway.
“Given those factors, as well as the fact that COIN is a crowded short, we believe shorting the company’s shares outright represents a risky strategy, especially as the stock could be prone to abrupt upside moves as the company pushes through its legal battle with the SEC,” Palmer concluded.
