The Coinbase Global Inc (NASDAQ: COIN) stock price fell 4.75% after an analyst at Piper Sandler issued a note downgrading the stock from overweight to neutral, citing the uncertain regulatory landscape after the US Securities and Exchange Commission (SEC) sued the company for not registering as an exchange.
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Coinbase has defended itself, saying that the cryptos sold on its platform are not securities; hence, it does not need a license to operate an exchange. The company’s share price has risen 60.25% in the past month after Blackrock applied with the SEC to issue a new spot Bitcoin ETF.
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The crypto exchange is listed in the surveillance-sharing agreements to help detect fraud in the underlying bitcoin markets as part of their ETF applications. Other fund managers, including Fidelity, VanEck and Invesco, have designated Coinbase as a custodian.
Most investors expect Coinbase to benefit significantly from its role as the chosen crypto exchange once the spot Bitcoin trading ETFs are approved by the SEC. However, there is no guarantee that the SEC shall approve any such ETF, and the timeline for such an approval is anyone's guess.
Coinbase said in a letter filed late on Wednesday in Manhattan federal court it would ask a judge to dismiss the SEC lawsuit, arguing the regulator does not have authority to pursue civil claims because the crypto assets trading on its platform are not “investment contracts” and thus not securities.
Piper Sandler analyst, Patrick Moley, downgraded the crypto exchange saying that the regulatory uncertainty has made it difficult to predict the firm’s revenues accurately. The analyst further stated that he expects second-quarter trading volumes and monthly transacting user totals to be the lowest in over two years.
Moley is the second analyst to express concern about Coinbase’s future since last week, Berenberg warned that the stock’s steep rally in June could be short-lived after investors bought Coinbase shares following BlackRock Inc.’s application for a spot Bitcoin exchange-traded fund, naming the crypto exchange as a custodian.
The legal tussle between Coinbase and the SEC will significantly impact prices going forward.
*This is not investment advice.
Coinbase stock price.
The Coinbase stock price fell 4.75% to trade at $74.63, from Wednesday’s closing price of $78.35.
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