On Wednesday, shares of cryptocurrency exchange and custodian Gemini plummeted by over 16% following a downgrade from Citigroup analysts. The downgrade, which shifted the company’s rating from Neutral to Sell, indicated that it may take years before Gemini becomes profitable. In conjunction with the downgrade, Citi also reduced its price target for Gemini from $13 to $5.50. At the time of the downgrade, Gemini’s stock was trading at approximately $5.95 per share.
Founded by Cameron and Tyler Winklevoss in 2014, Gemini launched its platform in 2015, initially concentrating solely on Bitcoin trading. Since then, the company has broadened its offerings to include a range of crypto products and services, catering to both retail and institutional clients. These services encompass spot trading, derivatives, staking, institutional-grade custody, an over-the-counter desk, a stablecoin, and a crypto rewards credit card.
Gemini went public on the Nasdaq Global Select Market in September 2022, pricing its IPO at $28 per share and raising a capital of $425 million, which valued the firm at roughly $3.3 billion. However, the recent downgrade positions the stock significantly below its IPO price.
In February, the company announced a comprehensive plan aimed at financial prudence, which included exiting operations in the U.K., European Union, and Australia. This decision was made as part of broader efforts to cut operating expenses and streamline operations in pursuit of profitability. Users in those regions were granted a two-month period to withdraw funds before their accounts would be automatically closed. Additionally, Gemini reduced its workforce by 25% and expressed intentions to incorporate artificial intelligence to drive efficiency improvements.
In a joint blog post, the Winklevoss twins asserted that these measures were intended to help align expenses with their headcount reduction while hastening the company’s path to profitability, even amid challenging market conditions: “Simplify, consolidate, then accelerate. Onward!”
In a related development, Citigroup also adjusted its price targets for major cryptocurrencies Bitcoin and Ethereum earlier in the week, lowering its 12-month forecast for Bitcoin from $143,000 to $112,000, and for Ethereum from $4,304 to $3,175. As of Wednesday, Bitcoin was trading around $71,250 and Ethereum at approximately $2,175, both experiencing declines due to disappointing U.S. inflation data and rising investor concerns related to the ongoing conflict in Iran.
Citi strategist Alex Saunders noted that as regulatory developments previously bolstered adoption and inflows, the potential for significant legislative action in the U.S. might be dwindling. The approaching midterm elections in November could further complicate the regulatory landscape for cryptocurrencies. The prospects for the crypto market structure bill, known as the CLARITY Act, could significantly shift depending on the outcomes of these elections, particularly if Democrats gain additional seats in Congress, as support from at least seven Senate Democrats will be essential for the bill’s advancement.
Despite the grim outlook from analysts and the steep drop in stock prices, users on Myriad—a prediction market platform from Decrypt’s parent company, Dastan—expressed a slightly positive sentiment regarding Bitcoin’s short-term future. They estimated a nearly 55% chance that Bitcoin would climb to $84,000 rather than decline to $55,000.
