Trust issues may have worsened crypto winter enough to downgrade Coinbase, but analysts laid out a case for the growing use of blockchain in everything from payments to supply chains.
In a research report paired with a stock downgrade, Bank of America's interest took a very clear turn from cryptocurrency to blockchain.
The stock was the Nasdaq-listed Coinbase exchange, which analysts downgraded from "buy" to "neutral" and slash the stock price target by more than one third, from $77 to $50 — roughly 10% above COIN's current price.
Their problem is not concern for Coinbase's survival, as they said both that it is confident the publicly listed and regulated exchange is not another FTX, CoinDesk reported.
And longer term, BoA said, the collapse of FTX, FTX US and trading firm Alameda Research after it lost as much as $8 billion worth of exchange customers' funds trying to hide its own trading losses could well be good for Coinbase long term.
A trust-slashing event like the second-largest global cryptocurrency exchange proving to be a shell so hollow it shocked a restructuring CEO who also handled Enron can't help but be good for the longest and most-regulated firm.
That said, the analysts pointed out that Coinbase isn't immune to the "broader fallout in the crypto market" that includes three potential headwinds:
"Dampened trading activity thanks to weaker confidence in crypto, delayed regulatory clarity and the possibility that contagion leads to an even wider fallout for the industry."
Don't Forget the Blockchain
But in a separate analysts' note on Nov. 18, BoA analysts Alkesh Shah and Andrew Moss said that the debacle of FTX's collapse shouldn't blind investors to the reality that "the development of applications that leverage distributed ledger and blockchain technology continues to advance," according to CoinDesk.
One example they gave was the recent announcement by the Federal Reserve Bank of New York and eight banks including BNY Mellon, Citi and HSBC — but not Bank of America — beginning a 12-week proof of concept for a "wholesale" central bank digital currency that would be used exclusively by financial institutions and the central bank for back-end settlement.
The benefits of a wholesale CBDC, which has the technology of a digital dollar but not the drawbacks like the potential to disintermediate retail banks, they pointed out, include real-time payments settlement, far cheaper transaction costs and the potential to let banks reallocate the funds they place in other banks as collateral for quicker payments settlement into yield-bearing investments.
Even these wholesale CBDCs — while a lot less complex than a consumer-facing "retail" digital dollar — will offer plenty of growth opportunities to "infrastructure providers that offer distributed ledger platforms, cloud storage, cybersecurity, digital asset custody/wallets and telecom for offline access."
