Citigroup, a major U.S. investment bank, has lowered its target price for cryptocurrency exchange Coinbase (COIN) from $505 to $400. According to a CoinDesk report, Citi cited declining trading volume, slowing institutional investor activity, and uncertainty surrounding the passage of U.S. cryptocurrency legislation as the main reasons for the downgrade.
Citi raised its target price to $505 in July of last year, when Coinbase's stock price hit an all-time high around $450. However, with market turnover recently slowing noticeably, expectations for short-term earnings momentum appear to have been lowered.
Coinbase's performance is heavily dependent on trading volume. If volatility in Bitcoin and major altcoins declines and institutional trading desk activity declines, profitability will quickly suffer. In particular, analysts say the leverage effect of the exchange business is being limited as spot ETF inflows slow and investor sentiment weakens.
However, Citi maintained its "Buy/High Risk" rating on Coinbase. This reflects the possibility of a short-term performance slowdown, but also suggests that the company's medium- to long-term growth story remains valid.
The report cited progress on the CLARITY Act, the US cryptocurrency market structure bill, as a key driver of the stock price recovery. The passage of the bill is expected to clarify the distinction between tokens as securities and commodities, alleviate regulatory risks for exchanges, and potentially lead to a resurgence of institutional capital inflows. The resolution of regulatory uncertainty is likely to be a watershed moment for Coinbase's stock price rebound.
This target downgrade is interpreted as more of a "speed adjustment" than a structural negative signal. The nature of the exchange industry is such that during boom periods, performance and stock prices skyrocket, but during periods of contraction, volatility increases. Citi's decision to maintain a high-risk rating reflects this characteristic.
Ultimately, Coinbase's direction is clear. The moment regulatory reform and trading activity converge, momentum could be rekindled. The issue isn't the growth story, but the timing. The legislative schedule in the US Congress and the recovery of market turnover are expected to determine future stock price movements.
