In a recent move, analysts from Compass Point initiated coverage of Bullish, a cryptocurrency exchange, with a neutral rating and a price target of $45. This target reflects a significant potential downturn of 16% from its current trading price. The cautious outlook arises amid prevailing uncertainties regarding Bullish’s entry into the U.S. market.
Analysts Ed Engel and Abdullah Dilawar emphasized that there remains a legislative vacuum in the U.S. marketplace. Specifically, Congress has yet to pass the CLARITY Act, crucial legislation that could delineate the roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Such legislative clarity is vital, especially given New York State’s restrictive BitLicense that poses additional hurdles for Bullish’s ambitions.
“We have a hard time seeing Bullish entering U.S. markets until Congress passes market structure legislation,” the analysts noted. “Until then, NYDFS [New York Department of Financial Services] is viewed as the industry’s de facto U.S. regulator.” This statement underscores the complex regulatory environment that companies like Bullish must navigate to establish a foothold in the U.S. market.
Further elaborating on the regulatory landscape, Engel and Dilawar pointed out the historical hesitance of the NYDFS towards innovative blockchain technologies. They expressed skepticism regarding Bullish’s prospects for obtaining a BitLicense, particularly given its role as a market maker on its own exchange. “While the company is extremely transparent with its AMM [automatic market maker] liquidity and algorithm, we have a hard time seeing NYDFS issue a BitLicense to an exchange acting in this capacity,” they remarked.
On a recent trading day, Bullish shares (BLSH) experienced a substantial drop, closing down by 12% and hovering just over $54. This downturn comes in the wake of their stock debut on the New York Stock Exchange, where shares peaked as high as $118 shortly after being offered at $37 during its IPO. Analysts noted that BLSH appears overvalued, trading at an astonishing 110 times its core operating profit and 68% above its IPO price. This valuation raises concerns about the sustainability of such high prices in an increasingly competitive environment.
Despite these apprehensions, Engel and Dilawar highlighted a potential silver lining. Should Bullish secure the necessary U.S. license, it could emerge as a formidable competitor to Coinbase, which currently dominates institutional trading in the U.S. They pointed out that Bullish’s competitive pricing structure could enable it to capture some of the market share currently held by Coinbase, particularly as the latter faces higher institutional fee rates and limited domestic competition.
“We think there could be a better buying opportunity within 1-2 quarters,” they advised, hinting at a potentially advantageous market entry for savvy investors. The analysts reiterated the importance of competitive pricing in attracting institutional clients away from Coinbase’s established position.
Bullish offers a unique platform where clients can buy, sell, and speculate on the future prices of digital assets, with a distinct focus on institutional investors rather than the retail market. Currently, Bullish is concentrating its efforts on attracting traders in Europe and Hong Kong, with aspirations to eventually penetrate the lucrative U.S. market.
This latest analysis comes in the context of other major public offerings in the crypto space. For instance, the Boston-based Circle, known for issuing the USDC stablecoin, had a successful June debut on the NYSE, where its stock soared from an original IPO price of $31 to a peak of $299. On the other hand, brokerage platform eToro experienced a 29% stock surge following its Nasdaq listing in May.
Bullish’s CEO, Tom Farley, who previously served as president of the NYSE, expressed optimism about the timing of their IPO, asserting that the firm aimed to align itself with a burgeoning phase in the digital assets industry. As market dynamics continue to evolve, the prospect of profitability and market expansion for Bullish could hinge on regulatory developments and its strategic positioning amidst its competitors.
This public offering isn’t happening in isolation; it’s part of a larger narrative involving several crypto-focused companies going public. With the digital asset landscape evolving rapidly, it remains to be seen how Bullish will navigate these challenges and position itself as a key player in the marketplace.