Morgan Stanley Downgrades Coinbase Amid Declining Crypto Trading Activity
Morgan Stanley has downgraded Coinbase from equal-weight to underweight and slashed its price target to $120, citing weak trading volumes and deteriorating revenue forecasts. The bank significantly reduced its 2027 and 2028 earnings projections, reflecting growing concerns over the sustainability of crypto exchange profitability. The move follows a sharp drop in Coinbase’s stock price despite broader market rebounds.
Morgan Stanley downgraded Coinbase’s stock rating from equal-weight to underweight on November 2, 2026, slashing its price target from $258 to $120 amid declining trading volumes and deteriorating revenue forecasts. The bank cited a 35% year-over-year drop in third-quarter revenue—$1.22 billion—and a 44% decline in trading revenue to $590 million, with subscription and services revenue falling 20% to $570 million. Despite a rebound in cryptocurrency prices, trading volumes remained weak, dropping 10% during the quarter, and volatility hit its lowest levels in years. Morgan Stanley significantly revised its 2027 revenue forecast downward by 28% and adjusted EBITDA by 47%, projecting only $2.4 billion in normalized EBITDA by 2028—14% below its 2025 level. The firm also reduced Coinbase’s EBITDA multiple from 20 to 12, signaling heightened risk perception. These revisions followed Coinbase’s own lackluster fourth-quarter outlook, with projected trading revenue of $165 million through October 25 and subscription revenue between $550 million and $630 million, while adjusted expenses could reach $1.16 billion—up from $975 million in Q3.
The downgrade reflects a broader erosion of confidence in crypto exchange profitability, driven by reduced market activity and uncertainty after Binance-related disruptions. Michael Cyprys, Morgan Stanley’s analyst, emphasized that Coinbase’s core revenue streams are under pressure, and its ventures into new business areas may not compensate in the
The downgrade could signal a broader reassessment of valuation models for crypto-native firms, particularly those reliant on transaction volumes that have not rebounded in line with asset prices. As Coinbase represents one of the most prominent public exchanges, its struggles may heighten scrutiny on other platforms like Kraken or Binance’s U.S. operations, potentially affecting investor confidence across the sector. The disconnect between rising crypto prices and stagnant trading activity raises concerns about market depth and liquidity, which could undermine trust in digital asset ecosystems. This situation echoes the 2018–2019 bear market, when many exchanges faced similar revenue declines despite price recoveries, leading to widespread restructuring. Today’s environment may be different due to institutional adoption and ETFs, but the lack of volume recovery suggests underlying demand remains fragile. What to watch for next is whether Coinbase can deliver meaningful growth in non-fe