Coinbase Global's (COIN) security infrastructure and regulatory compliance give the company a "structural advantage" over competing global crypto exchanges, Stephen Glagola, equity research analyst at Cowen, said in a note to clients Thursday.
- Cowen opened research coverage on Coinbase with an Outperform rating and $85 price target.
- The company's shares are currently trading around $70 and have lost more than 70% this year as crypto and equity markets have weakened.
- The current structure of the exchange industry suggests that the risk of competition lowering fees in the short term is low, as platforms also compete on platform security and trust, access to assets, ease of use, customer support and alternative products, Glagola said in the note.
- In the longer term, he said, substantial fee compression is possible as the industry matures.
- Cowen estimates Coinbase will account for about 46% of regulated crypto spot volume on U.S. exchanges in 2021, up from 39% in 2020.
- Glagola said he expects the launch of Coinbase's crypto derivatives in the U.S., if approved by regulators, to be a catalyst for growth, along with the potential for "offshore liquidity returning to the U.S."