Moody’s downgrades Coinbase, citing ‘uncertain magnitude’ of SEC charges

Moody’s, a credit ratings agency, has revised its rating of Coinbase from “stable” to “negative” in response to the SEC’s legal action against the crypto exchange for allegedly operating without being registered as a securities broker.

Moody’s stated in a June 8 statement that the downgrade was a result of worries surrounding the effect of the Securities and Exchange Commission’s action on Coinbase’s daily activities.

Despite the downgrade, Moody’s remarked that Coinbase has a “strong” liquidity position. The rating agency was impressed by the firm’s $5 billion in cash and equivalents in comparison to its $3.4 billion in long-term debt.

The company additionally declared that it anticipates Coinbase to persistently prioritize its “cost control” that has effectively counteracted decreases in transaction income in the past.

It is likely that Coinbase CEO’s stock sale was not deliberately scheduled to take place the day before the SEC lawsuit was filed.

Moody’s was not the only one to change its perspective on Coinbase; Berenberg Capital Markets maintained their “hold” rating to their customers, but reduced their price target for COIN shares from $55 to $39.

In emailed comments to Cointelegraph, Mark Palmer, a research analyst at Berenberg, stated that the decrease in the price target is based on their opinion that Coinbase’s already-weak Q2 trading volumes could “persist and intensify” as a consequence of the SEC’s charges.

Palmer further highlighted the SEC’s desired outcome, which would entail the cessation of COIN’s major operations, particularly its staking services. He suggested that investors should not invest in Coinbase shares in the near future.

Palmer may deem Coinbase uninvestable, but ARK Invest CEO Cathie Wood appears unconcerned. In a discussion with Bloomberg, Wood expressed that the expanding regulatory oversight of rival crypto exchange Binance is ultimately advantageous for Coinbase in the long term.

At the time this was written, ARK Invest, owned by Wood, was the fourth largest holder of Coinbase shares and does not appear to be relinquishing its spot anytime soon. On June 7th, the investment firm bought an extra $21.6 million worth of COIN stock.

Coinbase stock has experienced a 15.7% drop since the start of the week, with shares now trading at $54.90 each, as per Google Finance’s figures.

The magazine states that Bitcoin is heading towards a commitment to “Net Zero”.