1.25pm: Coinbase rallies in the face of SEC threats
Existential regulatory threats don’t appear to be phasing Coinbase Global Inc (NASDAQ:COIN) investors at the moment.
Shares in the Nasdaq-listed cryptocurrency exchange have rallied nearly 80% since plummeting to a 2023 low on June 6.
On that day, the US Securities and Exchange Commission (SEC) slapped the exchange with a lawsuit on charges of securities law violations.
The question of whether some cryptocurrencies constitute unregistered securities has been an issue since 2020, but has come to a head this year with the SEC fronting a full-on assault against Coinbase, Binance, Kraken and other major crypto exchanges.
According to the SEC’s complaint, since at least 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities.
Successfully suing Coinbase for these violations could severely limit the company’s revenue streams, so why is Coinbase in the middle of an impressive stock market rally?
After all, even with the regulatory threats aside, cryptocurrency trading volumes have tanked this year, causing downward pressure on Coinbase’s bread and butter: Transaction fees.
Firstly, while cryptocurrencies have seen a sharp decline in trading volumes, bitcoin’s spot price has been on a roll.
Year to date, the benchmark cryptocurrency is up over 70%, while ether (ETH), the world’s second-largest cryptocurrency, is up over 45%.
Though Coinbase deals in dozens of cryptoassets, bitcoin and ether comprise more than half of all trades, according to 2022 financials.
The other big reason behind bullish investor sentiment is its potentially lucrative tie-up with the world’s largest asset manager BlackRock.
BlackRock is fighting to get its spot bitcoin exchange-traded fund approved by the SEC, and Coinbase may play a crucial part in that.
BlackRock’s first application was knocked back due to “inadequate” safeguards against potential fraud and manipulation in the unregulated crypto markets.
To assuage the SEC’s fears, BlackRock has enlisted Coinbase as a surveillance-sharing partner.
Fidelity and the Chicago Board Options Exchange have also named Coinbase in their bitcoin spot ETF applications.
Exactly how lucrative this will be for Coinbase is unknown, but with tens of trillions of dollars in combined assets under management, these financial institutions have deep pockets to draw from.
9am: Bitcoin briefly touches 31k
Bitcoin (BTC) briefly touched US$31,000 during Monday’s trading session before a bout of profit taking sent the benchmark cryptocurrency down to US$30,400 by the end of the session.
This morning, BTC/USDT added 0.4% to bring the pair back up to US$30,550.
For the most part, bitcoin has stayed firmly within the 30k-31k sideways channel for three weeks now, as traders await good or bad news from BlackRock’s spot bitcoin exchange-traded fund application with the US Securities and Exchange Commission (SEC).
Bitcoin bulls are eager to hold the 30k support line, but may face stiff resistance if BlackRock’s application plays out over a prolonged period.
Especially since bitcoin trading volumes are at four-month lows despite all the ETF buzz.
Can bitcoin stick above 30k despite low volumes? – Source: currency.com
Coinbase shows strength
In the equities space, Nasdaq-listed cryptocurrency exchange Coinbase Global Inc (NASDAQ:COIN) is enjoying a rally on the stock market, closing over 3% higher at US$81.12 per share on Monday.
Coinbase is over 60% higher month on month.
Despite facing intense regulatory pressure in the US, the company’s recruitment as custodian for BlackRock’s (as yet unapproved) spot bitcoin exchange-traded fund has been a significant boost.
Back to the cryptocurrency markets, Ethereum (ETH) had a volatile Monday session, having surged above US$1,900 before retracting to US$1,880 come the midnight bell.
ETH/USDT added 0.2% in this morning’s Asia trades, bringing the pair to US$1,884 at the time of writing.
In the wider altcoin space, Solana (SOL) continues to outpace the market with another 5% added overnight, bringing week-on-week gains of nearly 15%, despite no obvious catalyst.
Polygon (MATIC) is also faring well among the blue chips, adding nearly 10% overnight, while Cardano (ADA) and bitcoin hard fork Bitcoin Cash (BCH) added low single digits.
Global cryptocurrency market capitalisation currently stands at US$1.19tn after adding 1.7% overnight.