(Bloomberg) -- The biggest US cryptocurrency exchange could fall victim to a slump in Bitcoin and waning enthusiasm for exchange-traded funds that invest directly in the digital token, according to JPMorgan Chase & Co.

Most Read from Bloomberg

• China Weighs Stock Market Rescue Package Backed by $278 Billion

• India Tops Hong Kong as World’s Fourth-Largest Stock Market

• Hong Kong Stocks at 36% Discount Show True Depth of China Gloom

• Florida Governor DeSantis Drops Out of 2024 Race, Endorses Trump

• Morgan Stanley, JPMorgan Say Buy the Dip After Treasury Rout

“We think the catalyst in Bitcoin ETFs that has pushed the ecosystem out of its winter will disappoint market participants,” analysts led by Kenneth Worthington wrote in a note on Monday, downgrading Coinbase Global Inc. to underweight from neutral.

Coinbase’s shares dropped as much as 5.4% in US premarket trading on Tuesday following the downgrade, which marks JPMorgan’s first sell-equivalent rating on the stock since initiating coverage in May 2021.

Coinbase shares ended 2023 with a gain of nearly 400%, tracking Bitcoin’s surge into the end of the year. However, following the US financial regulator’s recent approval for spot Bitcoin ETFs, market watchers have been left wondering whether crypto-related stocks will be able to continue their stellar gains. Coinbase shares are down 26% so far this year, while Bitcoin has declined 7.1% and was last trading below $40,000.

Read more: Bitcoin Selloff Hits 20% Since Landmark Spot ETF Listings

“We see greater potential for cryptocurrency ETF enthusiasm to further deflate, driving with it lower token prices, lower trading volume, and lower ancillary revenue opportunities for firms like Coinbase,” JPMorgan’s Worthington added. The analyst maintained his price target of $80 on the stock, which predicts a 38% drop in the shares over the next 12 months from Monday’s close.

Bearish sentiment is rising on Coinbase, which has 12 sell ratings, eight buys and eight holds, according to data compiled by Bloomberg. CFRA cut its recommendation to sell last week due to worries over competition.

--With assistance from Henry Ren.

Most Read from Bloomberg Businessweek

• The Downfall of Diddy Inc.

• How Sweden Quit Smoking Without Quitting Nicotine

• The Bitcoin Hype Is Back and About Just as Hollow as Before

• Japan’s Market Roars Back to Life—With Old-Timers Leading the Way

©2024 Bloomberg L.P.