Market Overreacts to Coinbase Breach, Analysts Claim, Amid SEC Investigation Dragging COIN Down

Coinbase Shares Tumble 7% After Cyberattack and SEC Investigation; Analysts Urge Calm

Coinbase (COIN) shares dropped sharply by 7.2% on Thursday following the company’s disclosure of a cyberattack and the revelation of an ongoing SEC probe into its 2021 IPO user metrics. The stock experienced a near 9% intraday decline before clawing back some losses.

Market analysts at Barclays and Oppenheimer have downplayed the severity of the sell-off, suggesting investors may be overreacting to the twin setbacks.

The cyberattack stemmed from a social engineering scheme involving bribed overseas customer support agents who leaked sensitive customer data, including names, addresses, and masked Social Security numbers. Scammers then exploited this information to impersonate Coinbase and coax users into transferring crypto funds.

Coinbase firmly refused to pay the hackers’ $20 million ransom demand, opting instead to reimburse affected users and coordinate with law enforcement. The breach impacted less than 1% of active users, with no passwords, private keys, or funds directly compromised.

Separately, the SEC is investigating whether Coinbase overstated its user base in its 2021 IPO filing, specifically the claim of “100 million verified users.” Coinbase ceased reporting this metric over two years ago, and the probe reportedly dates back to the early Biden administration.

Paul Grewal, Coinbase’s chief legal officer, stated the investigation should be resolved swiftly and does not affect the company’s current business fundamentals.

The news arrives just days after Coinbase’s stock rallied on the announcement of its inclusion in the S&P 500 index—a move that may have primed the shares for a short-term pullback.

Barclays noted that recent gains likely amplified the market’s sensitivity to the news, while Oppenheimer called the dip a “buying opportunity,” maintaining an outperform rating.

This episode highlights the fine line crypto firms walk between technological security and human risk factors. Though the breach is contained, Coinbase’s crisis management and the market’s recollection will influence how long the episode weighs on the company’s reputation.

Benchmark analyst Mark Palmer characterized the breach as a one-off incident involving third-party contractors rather than a systemic security failure. He also dismissed the SEC inquiry as “minor noise,” tied to a discontinued metric.

Despite the headwinds, Palmer raised his price target on Coinbase from $252 to $301, citing its strong growth potential supported by increasing institutional adoption and clearer regulatory frameworks.