Credit ratings agency Moody’s has decided to downgrade Coinbase, the popular cryptocurrency exchange, from a “stable” rating to a “negative” one. This decision comes as a direct result of the recent legal action taken by the U.S. Securities and Exchange Commission (SEC) against Coinbase.
The SEC has accused the Coinbase of operating as an unregistered securities broker, leading to concerns about the impact of this action on Coinbase’s day-to-day operations.
However, Moody’s did highlight that despite the downgrade, Coinbase maintains a “strong” liquidity position. The agency positively acknowledged the company’s $5 billion in cash and equivalents, which outweighs its $3.4 billion in long-term debt.
Furthermore, Moody’s expects Coinbase to continue focusing on expense management, a strategy that has proven effective in mitigating declines in transaction revenue in the past.
Moody’s was not the only entity to adjust its outlook on Coinbase. Berenberg Capital, a financial services firm, maintained its existing “hold” rating for its clients but reduced its price target for COIN shares from $55 to $39.
The impact of these developments on Coinbase shares has been significant. Since the beginning of the week, the shares have experienced a sharp decline of 15.7%, with the current trading price at $54.90 per share.
Also Read: Binance & Coinbase Under Fire: Is the SEC Killing Crypto?
Investors and industry observers are closely monitoring the situation as Coinbase navigates the regulatory challenges ahead.
