In a report prepared by JPMorgan, the research team led by Kenneth Worthington highlighted that Ethereum would contribute significantly to Coinbase’s profits. Last Friday, this team deepened its analysis, pointing out that, in addition to the positive impact of the price of Bitcoin, the appreciation of ETH plays a particularly relevant role.
America’s largest bank, JPMorgan (JPM), said the Ethereum network and its ether token (ETH) could be a notable contributor to the broader Cryptocurrency ecosystem and a positive driver of Coinbase’s (COIN) earnings. This “positive driver” of earnings moved JPMorgan’s price target for Coinbase from $95 to $150, despite maintaining the same neutral rating. Meanwhile, Coinbase shares fell more than 4% in premarket trading to $223.
Currently, the Ethereum network and its token represent great competition for Bitcoin (although not in price) for one fundamental reason, its use cases. Although the Ethereum ecosystem does not have a capitalization like that of Bitcoin, its versatility and its possibility of development outside the cryptographic industry are important, JPMorgan highlighted.
The bank highlights the recent Dencun upgrade on March 13 as a pivotal event driving the development of cryptocurrencies. Additionally, analysts emphasize the importance of Ethereum’s roadmap progression, indicating its potential to foster positive long-term outcomes for the cryptocurrency market.
Why Would Ethereum Boost Coinbase Earnings?
In the current panorama, the gains of Ethereum and Bitcoin represent, as in 2021, an optimistic scenario for the crypto market. Coinbase’s target price change is directly related to this, according to JPMorgan due to the importance of this company in the industry. Despite maintaining the same neutral rating, a positive stance in the face of a new bullish cycle confirms Coinbase’s good position.
A 10% reduction is observed in the last ten days, while in the last month, Coinbase shares have seen an increase of 34.41%. Additionally, Coinbase’s share price stands at $242, according to Yahoo Finance. This is closely linked to general market sentiment and these types of bullish sentiments positively impact traditional financial institutions.
During their observation, the JPMorgan team clarified that the new challenge would be Bitcoin exchange-traded funds (ETFs) and the impact they would have on the entire industry. In the future, the same institutional interest could be aroused by Ethereum ETFs. This despite the differences that exist regarding the use and qualities of each cryptocurrency.
“Ethereum’s use cases transcend the Crypto ecosystem and we believe they will create a strong NEAR-term earnings driver for Coinbase,” analysts led by Kenneth Worthington wrote in a research report on Friday.
The report explains the following:
“We see the progression along the Ethereum roadmap, including the Dencun upgrade, which occurred on March 13, driving the development of cryptocurrencies, which is positive in the long term.”
Coinbase’s long-term success would be driven by development, with a focus on tokenization and payments, the bank said.
In particular, the financial institution highlighted that the development of Coinbase was linked to the development of Ethereum itself, especially in tokenization and payments. That is why while Bitcoin is relevant to the industry, Ethereum has been classified for its versatility and developed ecosystem. This is thanks to the layer 2 solutions developed in Ethereum that facilitate the implementation of payment gateways and reduce existing fees.
However, after the Dencun update, the new objective would be to reduce transaction costs as much as possible. This would be achieved by using Rollups to speed up transactions on the network.
By Audy Castaneda
