The start of the new year saw a significant drop in Bitcoin‘s price, plunging from approximately $49,000 to $38,500. Oppenheimer analyst Owen Lau has warned that Coinbase shares could experience high volatility in the short term. This is due to an ongoing lawsuit with the U.S. Securities and Exchange Commission (SEC) and the potential for further decreases in Bitcoin’s value.
Legal Challenges and Coinbase’s Stock Turbulence
Lau pointed out the legal uncertainties surrounding Coinbase, which is facing a lawsuit from the SEC alleging securities law violations. These issues could lead to substantial short-term volatility for Coinbase shares, currently valued at around $125. The lack of clear legal regulations in the U.S. further complicates the matter.
Despite the predicted volatility, Bloomberg’s analyst Elliot Stein has an optimistic outlook, suggesting Coinbase has a 70% chance of winning the lawsuit. Meanwhile, Coinbase shares have experienced a significant rise of about 67% over the past three months, despite a recent 28% drop.
The increase in Coinbase’s stock value is partly attributed to the SEC’s approval of a spot Bitcoin ETF on January 10, which led to a surge of optimism. However, Bitcoin’s price fell by 20% in the two weeks following the ETF’s approval, before recovering some of its losses.
Lau also forecasts short-term volatility for Bitcoin’s price, suggesting it may face downward momentum until a new catalyst for growth emerges. This prediction comes as JPMorgan downgraded Coinbase’s rating due to the impact of Bitcoin’s price drop on spot Bitcoin ETFs.