Coinbase Stock Has More Than Doubled This Year. Avoid It.

A wager on crypto takes a strong stomach. Throw in uncertain court rulings and a battle royale with Wall Street giants, and it gets more treacherous.

But investors shouldn’t extrapolate the court wins and bout of exuberance into a long-term bull case for Coinbase. The Securities and Exchange Commission could still throw up roadblocks to a Bitcoin ETF. Coinbase’s regulatory problems run deep, including a lawsuit filed by the SEC over its core trading business. Other revenue drivers look dicey. And more money flowing into crypto will heat up competition for investments, chipping away at trading fees.

Yet despite building a premier crypto platform, Coinbase has hardly been a winning stock. At about $83, it trades far below its opening price of $381 on its first day of trading in 2021. Its market cap is $20 billion, down from a closing high of $86 billion. As the SEC sees it, Coinbase is operating an unregistered securities exchange. The agency for years has said Bitcoin falls outside its purview. But virtually all other tokens, in SEC Chair Gary Gensler’s view, are securities whose issuers need to register. The SEC’s case, filed in June, centers on 12 such tokens, as well as Coinbase’s staking service, but in essence, Gensler’s argument is that the bulk of Coinbase’s business violates the law.

Coinbase is trying to move things along faster. Chief Legal Officer Paul Grewal says the company has asked the judge to quickly resolve the fundamental issue of what crypto transactions fall under securities laws. The company is also lobbying Congress to pass legislation that would clarify the rules.

The problem is that the core trading business is suffering. Fees haven’t fallen as fast as transaction volume, but that’s because the company has been able to increase the “take rate” it earns on trades. Some analysts think that can’t last as competition heats up, especially since Coinbase already seems to be losing market share to lower-cost brokers like Robinhood Markets .

Law Law Latest News, Law Law Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

What's good for bitcoin might not necessarily be good for Coinbase, analysts sayGrayscale's court victory against the SEC may be good for bitcoin, but some on Wall Street are concerned the ruling doesn't offer as much hope for Coinbase.
Source: CNBC - 🏆 12. / 72 Read more »