Oppenheimer analyst Owen Lau pulled his outperform rating on Coinbase (COIN), downgrading to the company's stock to perform after the crypto exchange disclosed the receipt of a Wells notice from the U.S. Securities and Exchange Commission late Wednesday. Lau also noted Tuesday’s Economic Report of the President, which was highly critical of the digital-asset industry.
Shares of Coinbase were down 13% in premarket trading on Thursday.
Given the unhealthy regulatory environment, Lau – who is otherwise supportive of blockchain technology and digital-asset development in the U.S. – said he is becoming increasingly concerned about the “fairness of the enforcement actions and the ability for the [crypto] ecosystem to grow with seemingly limited and shrinking support from the banking system.”
With Coinbase stock up about 118% year-to-date versus a gain of around 3% for the S&P 500, Oppenheimer’s Lau said he is moving to the sidelines.
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“Recent strength in bitcoin (BTC) indicates that people have called for alternative financial systems, but it could also become the victim of its success,” Lau added.