By
Godfrey Benjamin
May 15th, 2024
At the beginning of the week, Coinbase generated significant buzz with its announcement of potential collaborations with several asset managers.
Coinbase Global Inc (NASDAQ: COIN), one of the world’s leading crypto exchanges, experienced a decline in its shares on Wednesday, dropping nearly 2% despite an initially optimistic start to the week.
According to a Bloomberg report, the company experienced a decline in its shares and closed at almost 2% lower at $78.35 per share. The drop was primarily attributed to a recent downgrade by analysts at Piper Sandler. Remarkably, this setback comes despite Coinbase Exchange’s significant year-to-date appreciation, with the stock notably surging by 133% since the beginning of the year.
Coinbase Shares Receive Analyst Downgrade
Coinbase Exchange’s journey has been marked by regulatory hurdles, particularly with the recent US Securities and Exchange Commission (SEC) lawsuit.
While the company has managed to mitigate some of its losses following the lawsuit announcement, concerns, and uncertainty lingers. The legal action by the SEC has created an environment of ambiguity for Coinbase, impacting analysts’ ability to forecast future revenues with confidence.
In a recent note to investors, Piper Sandler analyst Patrick Moley downgraded his recommendation on Coinbase shares from overweight to neutral. Moley’s revised stance comes as he expects the exchange’s second-quarter trading volumes and monthly active user totals to hit their lowest levels in over two years.
Notably, Piper Sandler is not the first to express concern about the regulatory constraints surrounding Coinbase. Last week, broker firm Berenberg also warned that the stock’s sharp surge in June could be short-lived after investors flocked in following the application for a spot Bitcoin Exchange-Traded Fund (ETF) by investment giant BlackRock Inc (NYSE: BLK).
At the beginning of the week, Coinbase generated significant buzz with its announcement of potential collaborations with several asset managers. The proposed partnerships aimed to introduce spot Bitcoin ETFs to the market, providing investors with a regulated and accessible way to invest in the premier digital currency.
Legal Proceedings and Implications
The SEC’s lawsuit against Coinbase revolves around the exchange’s trading of unregistered securities and the merging of functions that are traditionally separated within securities markets. The regulatory body is scrutinizing Coinbase’s operations and seeking to enforce compliance with securities regulations in a bid to protect investors.
According to an earlier report, the long-awaited court hearing between crypto exchange Coinbase and SEC has been scheduled to hold on the 13th of July. Coinbase’s defense strategy, which involved submitting its initial response ahead of the August 7th deadline, prompted the rescheduling of the court date from August to July.
The rescheduled court date indicates the progress of the Coinbase-SEC legal battle and the increasing momentum toward a trial, if necessary. The legal clash between the exchange and the regulatory authority carries significant implications for the crypto industry, as the outcome could potentially shape future regulations and standards.
The court proceedings will shed light on the alleged unregistered securities trading and the merging of functions within Coinbase’s operations, as mentioned in the SEC’s lawsuit. The case will determine the extent to which crypto exchanges must comply with existing securities regulations.