Coinbase shares have even further to climb despite already being up 13% since the start of December and the low appetite for crypto coming from retail investors, according to Needham. Needham raised its price target on Coinbase Tuesday to $160 from $120, implying about 13% upside from its closing price Monday. Needham analyst John Todaro cited improved competitive positioning for the company and greater optimism on the crypto industry after Binance’s historic settlement with the U.S. Department of Justice last month “that did not feature an FTX-style collapse.” “We get the sense that with greater market share COIN has additional pricing levers that can help offset the natural take rate decline due to mix shift, giving us increased confidence in our 2024 revenue estimates,” Todaro said in a note to investors Tuesday. Coinbase, which runs the biggest U.S. crypto exchange, has benefited from recent and significant rallies in the price of bitcoin , which have been led primarily by institutional investors for perhaps the first time in crypto history. Many are betting on even more institutional money entering the market as the likelihood that the U.S. will see its first spot bitcoin ETF early in the new year has driven most of the upward price action. Coinbase has custody partnerships with several of the funds in line to launch an ETF, including BlackRock , Franklin Templeton and WisdomTree. Meanwhile, although retail investors’ appetite for crypto has improved since bottoming a year ago after the collapse of FTX, interest is generally low, according to Needham. The firm measures retail sentiment using Google search trends, Coinbase’s Apple app store ranking and crypto website visits. “Retail crypto engagement is considerably lower than in prior years and despite the recent price gains, has been fairly muted,” Todaro said. “We have found that the best indicators for where crypto and COIN are in the cycle is based on a scale ranging from retail disinterest to euphoria. Today, retail interest is closer to disinterest.” Needham expects those retail trends to change further along into the new cycle, however. Based on bitcoin dominance , the measure of the market cap of bitcoin relative to the entire crypto market, bitcoin is in the earliest stage of a new cycle – which typically takes off in a big way around the Bitcoin halving. The next one is expected in the spring of 2024. Dominance tends to rise in bear markets as investors rotate into the safety of bitcoin compared to other crypto coins . It tends to fall in bull markets as new coins get introduced and investors try to ride their wave higher. “Currently, dominance remains near bear market highs indicating no excess capital has flowed into alt coins away from bitcoin recently which suggests to us that it is still early innings,” Todaro said. “In fact, dominance has increased since the start of 2023 which we attribute to 1) Bitcoin ETF expectations but also 2) early stages of capital flows in crypto.” —CNBC’s Michael Bloom contributed reporting.
