Moody reduces Coinbase rating from stable to negative amid Binance lawsuit

Moody, credit ratings firm reduced Coinbase’s rating from “stable” to “negative,” after the SEC filed a lawsuit against the cryptocurrency exchange for allegedly acting as an illegal securities broker in the United States.

According to Moody comment on June 8, the downgrade was made because of worries about how the Securities and Exchange Commission’s action will affect Coinbase’s ongoing business operations.

The SEC’s allegations will undoubtedly have some influence on Coinbase’s operations and revenues, but the extent of the impact is unknown. This is shown by the forecast’s change from steady to negative.

Moody’s observed that Coinbase retains a “strong” liquidity position despite the downgrading. The company’s $5 billion in liquid assets and $3.4 billion in long-term debt were viewed favourably by the rating agency.

The business went on to say that it expects Coinbase to continue its “concentration on cost management” that has successfully saved offset drops in transaction revenue.

Not just Moody’s changed its opinion on Coinbase but the financial services company Berenberg Capital reduced its price objective for COIN stocks from $55 to $39 while maintaining its previous “hold” rating for its investors.

According to Mark Palmer, Berenberg economist, the decrease in price target represents their belief that Coinbase’s already-weak Q2 trading volumes could “persist and increase” as a result of the SEC’s allegations.

Palmer said, “we would anticipate certain shareholders to lessen their exposure to COIN’s platform given the possibly significant effect of the lawsuit’s decision on its U.S. operations.”

Palmer further mentioned that the “desired remedy” of the SEC would necessitate the whole shutdown of COIN’s primary modes of operation, especially its staking services. Palmer therefore suggested that investors postpone making any short-term investments in Coinbase shares.

Palmer claims that it is impossible to place funds in Coinbase, while Cathie Wood, CEO of ARK Invest, is unconcerned. In an appearance Wood claimed that in the long run, the increased regulatory oversight of rival cryptocurrency exchange Binance was beneficial for Coinbase.

At the time of writing, Wood’s ARK Invest is the fourth-biggest shareholder of Coinbase stock globally, and it shows no signs of leaving that position any time soon. The financial institution added $21.6 million worth of COIN stocks on June 7.