Some
days are just bad, while others are downright catastrophic. This was shaping up
to be one of those days. Or one of those weeks. Coinbase stock has lost about
20% over the last seven days due to the Securities and Exchange Commission
launching a lawsuit against the largest cryptocurrency exchanges. However, it’s
important to note that COIN shares have already seen a 50% growth in 2023. So
are the last events precisely a reason to panic?
The SEC
has taken legal action against the biggest and most widely-known crypto
exchanges, Binance and Coinbase, one by one. Binance faced even more
allegations (thirteen!), which had a ripple effect on the entire crypto market.
Nonetheless, our focus in this discussion is on Coinbase, the US-based
exchange. The SEC accused the company of working as an unregistered exchange
and broker, providing access to assets that the SEC deems securities, including
Solana, Cardano, and others.
The
chart below illustrates the aftermath of these accusations. It’s essential to
remember that many different pieces of news influence the market. To navigate
this, you can utilize specialized trading and investment tools, such as the
economic data calendar. Its database knows all the significant economic events,
enabling you to factor them into your trading strategy.
A
distinctive characteristic of Coinbase shares is their high volatility – not
dissimilar to the assets the exchange allows you to trade. Long story short,
COIN shares experienced a 50% growth.
Such
growth won’t be surprising if you observe the pattern – Coinbase stock
typically moves in correlation with the prices of core cryptocurrencies like
Bitcoin and Ethereum. There is a direct correlation. Take a look at this year’s
results: Coinbase stock increased by 50%, BTCUSD
by 55%, and ETHUSD by 43%. When coins experience growth,
investors are more active, leading to increased profitability for exchanges.
However,
the SEC is the US regulator, the allegations caused a suspended state in all
crypto markets. Coinbase and Binance are major players in the industry. It is
likely that we can expect lengthy trial processes. Every news story related to
these cases will make the crypto market surge or decline.
If the
SEC’s trials conclude in their favor and impose certain requirements on crypto
exchanges, it could bring about significant changes. The main principles of
cryptocurrencies, based on an opposition to traditional financial systems and
banking, may be rocked.
But, to
be honest, this scenario is far from the reality right now. Coinbase and
Binance are ready to prove that they are not outlaws. Moreover, not all
agreements reached with the SEC are necessarily detrimental. These cases
provide an opportunity to establish new laws and requirements adapted to the
evolving crypto market. Such outcomes could offer more benefits than drawbacks,
as they would enhance market participants’ understanding of the rules of the
game.
Among
other things, it is worth noting that: 1) some investors showed their belief in
Coinbase stock after the drop, with Cathie Wood’s ARK Invest adding shares
worth over $21 million to the portfolio. 2) Coinbase’s Q1 financial report beat
expectations in terms of earnings and revenue.
All we
know for certain is that the near future is likely to be highly volatile,
characterized by sharp upward and downward movements. But for now, it’s too
early to discuss the long-term effects of these events on the company’s
business and structure.
To
determine the long-term prospects of Coinbase, it is crucial to closely follow
various news sources connected with the future course of events and be ready
for frequent changes in the situation.