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Coinbase Stock Plunges Amid SEC Investigation – Plus, Fed Focus

Steve Miley trader
Updated 27 Jul 2022

Trade Crypto Here Your Capital Is At Risk

Key points:

  • Coinbase Stock (COIN) Plunges
  • Cathie Wood's Ark Invest Unloads Over 1.4 Million COIN Shares
  • Fed In Focus Today

Coinbase stock plunged over 20% on Tuesday in reaction to the news that the Securities and Exchange Commission (SEC) is reportedly investigating the crypto exchange. Three funds of Cathie Wood's Ark Investment Management sold over 1.4 million shares of Coinbase Global (COIN) on Tuesday, according to an Ark trading update. We also take a look at the key FOMC decision on interest rates that comes later today.

Coinbase Stock (COIN) Plunges

COIN shares plunged just over 21% on Tuesday in reaction to the news that the SEC was reported to be investigating Coinbase for offering unregistered securities on its platform, as we reported in our post yesterday, SEC To Probe Coinbase On Crypto Listings. This stock price plunge saw Coinbase shares trade over 80% down from their IPO price from just over a year ago, in April 2021. The current market capitalisation for COIN is now about $12.6 billion, down from around $86 billion after the first trading day back in April last year.

Also Read: How Will Cryptocurrency Perform During A Recession?

Cathie Wood's Ark Invest Unloads Over 1.4 Million COIN Shares

Ark Investment Management, Cathie Wood's tech and crypto-heavy investment company, sold over 1.4 million shares in Coinbase Global on Tuesday. This news was announced in a daily email trading update from Ark, which had previously bought over half a million shares back in May this year. Yesterday saw the fund manager’s flagship Ark Innovation ETF selling 1.13 million shares. As of the end of June, Ark was Coinbase’s third-largest shareholder, with a then holding of around 8.95 million shares (according to Bloomberg-compiled data).

Fed In Focus Today

Today brings the US Federal Reserve Open Market Committee (FOMC) front and centre as all financial markets focus on the central bank of the world’s largest economy. The Fed is widely expected by the market to raise interest rates by another 75bp, as they did after their last meeting, and has been telegraphed over the past month. Anything other than a 0.75% rate increase would be a shock to the system and likely cause significant market turbulence. The Fed is caught between the growing prospect of a hard landing, a recession, at least partially driven by the rate increases this year, and high inflationary pressures, in the US and globally, not seen for over forty years.

From a scenario analysis perspective, a bigger rate hike would be a big step against inflation but raise the prospects of a recession, whilst a smaller rate hike would be seen as the Fed falling behind the curve and encouraging bigger inflationary forces. Key will be in the statement and press conference as to whether the financial markets take this event as “risk on” or “risk off.”

Steve has 29 years of financial market experience including 3 years at Credit Suisse and 15 years at Merril Lynch. Steve is the Academic Dean for The London School of Wealth Management and has won many awards from Technical Analyst Magazine.