Market Reaction to Coinbase Hack ‘Overblown,’ Say Analysts as SEC Probe Sinks COIN

Coinbase shares took a sharp hit after the company disclosed a cyberattack and a resurfaced Securities and Exchange Commission (SEC) probe on old user metrics, sparking concerns about the crypto exchange's security and regulatory compliance. However, analysts at Barclays and Oppenheimer say the market reaction may be overly pessimistic, with some describing it as "somewhat overblown."

The news of the cyberattack came after Coinbase revealed a social engineering-driven data breach, in which a group of overseas agents were paid off to leak customer data, including names, addresses and masked social security numbers. The hackers demanded a $20 million ransom, but Coinbase refused to pay, instead pledging to reimburse affected customers and working with law enforcement.

Less than 1% of transacting users were affected by the breach, and no passwords, private keys or customer funds were accessed directly. Despite this, the stock's intraday dip reached nearly 9% before recovering slightly.

A SEC Probe Amidst the Breach: Separating Fact from Fiction

Coinbase is also facing a long-running SEC investigation into whether the company overstated user numbers in its 2021 initial public offering (IPO) filing. The investigation centers on the 100 million "verified users" figure, which Coinbase stopped reporting over two years ago.

Analysts at Oppenheimer say that while the probe is ongoing, it appears to be isolated and not indicative of broader systemic risk. In contrast, Barclays notes that investors may be reacting not just to the news itself, but to the rapid rise in the stock in recent days, making the current weakness in share price "somewhat overblown."

Analysts Weigh In: Separating Signal from Noise

Paul Grewal, Coinbase's chief legal officer, has called for the SEC probe to be put on hold and emphasized that it doesn't relate to the company's current performance. Analyst Mark Palmer at Benchmark characterized the breach as a targeted, one-off incident rather than evidence of deeper security flaws.

A Buying Opportunity?

Oppenheimer analyst John H. Lippert has called the current weakness in share price "a buying opportunity," reaffirming his outperform rating for Coinbase. He noted that the episode underscores the thin line crypto firms walk between technological robustness and human vulnerability.

A Long-Term View

Mark Palmer, analyst at Benchmark, also downplayed the long-term significance of the breach, emphasizing that it was a targeted incident rather than evidence of deeper security flaws. He pointed out that the attackers gained access through bribed customer support contractors rather than through Coinbase's core systems.

A Bullish Outlook

Despite the headline risk, Palmer reaffirmed his bullish outlook, raising his price target on Coinbase to $301 from $252 and emphasizing the company's potential to benefit from growing institutional adoption as regulatory clarity improves.