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.
