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Barclays Upgrades: Coinbase and Robinhood
Barclays has recently upgraded both Coinbase and Robinhood, reflecting a positive shift in their business models. This upgrade from “underweight” to “equal weight” comes as the British bank acknowledges that these companies have “matured meaningfully” in their approach. The news led to a brief boost in their stock prices, although they later fell by over 3% due to a drop in bitcoin (BTC) and the broader crypto market.
The Role of Crypto Banking
Historically, crypto companies have faced significant challenges with traditional banking systems. Banks have often been hesitant to work with digital asset firms due to regulatory uncertainties and market volatility. However, as crypto adoption grows, banks are starting to open up to these companies, acknowledging the importance of integrating digital assets into the financial system.
Coinbase, for instance, is expected to benefit from a more favorable regulatory environment following the upcoming U.S. presidential election. Both major candidates have shown support for the digital asset industry, which could ease regulatory pressures and enhance opportunities for crypto banking.
Financial Resilience and Diversification
Barclays analyst Benjamin Budish noted that Coinbase has demonstrated resilience, especially after the turbulence in the crypto industry caused by the collapse of FTX and other major players in 2022 and 2023. Coinbase has managed to keep its costs under control, particularly in terms of hiring, even as trading activity surged in 2024. This disciplined approach has allowed the company to improve its profit margins.
Moreover, Coinbase is expanding its sources of income beyond traditional trading fees. The company is now earning from blockchain rewards, custody services, and other transaction fees. This diversification is crucial for its long-term stability and growth in the evolving landscape of crypto banking.
Positive Developments for Robinhood
Robinhood is also seeing improvements in its business model. The company is introducing new products and expanding its services in the UK and Europe. Additionally, the acquisition of Bitstamp, a well-known crypto exchange, could bring in new customers and further boost its growth prospects.
Barclays highlights that the factors previously leading to an “underweight” rating for Robinhood are now turning around. The bank now views the risk/reward balance for both Coinbase and Robinhood as more favorable.
The Future of Crypto Banking
As the crypto industry continues to evolve, the relationship between digital asset firms and traditional banks is becoming increasingly important. The shift towards more open and supportive banking practices reflects the growing acceptance of cryptocurrencies and the need for integration with established financial systems. With banks beginning to recognize the value of crypto banking, the industry may see more opportunities and stability in the future.
