Crypto-related stocks such as Coinbase Global have gained on the potential approval of exchange-traded funds tied to the spot price of Bitcoin but Mizuho Securities Dan Dolev is warning the company might not receive the hoped-for benefits.

Coinbase shares were down 1% in early trading at $150.94, reversing earlier gains. The cryptocurrency exchanges stock has tumbled from highs of more than $180 a share in recent days but it has still more than quadrupled over the past 12 months.That has prompted caution that the stock might be getting ahead of itself, including from Barrons.

Mizuhos Dolev, a longtime skeptic on the stock, sounded another warning on Thursday. He warned that while the rally has been based on excitement over the expected approval of spot Bitcoin ETFs, the reality might disappoint.

With the hype around Bitcoin ETFs likely to reach a climax in the coming weeks, COIN bulls could experience a rough awakening when they realize how minimal the revenue impact is, wrote Dolev.

Dolev reiterated an Underperform rating on Coinbase. His target for the stock price is $54, a bit more than one-third of its current level.

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The analysts calculations are based on the assumption that around $81 billion of new investment might flow into Bitcoin ETFs if they are approved. That would represent close to 10% of the current market capitalization of the digital currency.

Dolev estimates that Coinbase might end up serving as custodian of around half of that money.That would imply roughly $25 million-$30 million of custody-fee revenue earned by Coinbase on the Bitcoin ETFs, according to the Mizuho analyst.

A bigger boost could come from increased trading of Bitcoin on exchanges such as Coinbase. Assuming annual trading volume increased by around $83 billion, and applying Coinbases historical market share and fees, that implies around $200 million-$210 million of additional revenue, according to Dolev.

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This represents just mid-to-high single-digit percentage upside vs. current 2024 consensus, Dolev wrote. The potential upside to COIN revenue from Bitcoin ETF [approval] may be far less than what the stock indicates.

Coinbase didnt immediately respond to a request for comment from Barrons on Thursday.

It is worth noting that the calculations are sensitive to the assumptions made about what the approval of Bitcoin ETFs might mean for the sector. Analysts at Bernstein Research have estimated that the approval might help bring an additional $600 billion in funds into the crypto sector, considerably more than Dolevs estimate.

However, Dolev is hardly alone in his skepticism toward Coinbase stock. The average target for the stock price among Wall Street analysts tracked by FactSet

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Write to Adam Clark at adam.clark@barrons.com

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Coinbase Stock Wobbles as Analyst Warns Gains From Bitcoin ETFs Might Disappoint - Barron's