Coinbase could win big if the SEC approves spot Bitcoin ETF as the exchange is responsible for custody on most of the pending proposals.
The rush for spot Bitcoin exchange-traded funds (ETFs) could benefit Coinbase Global Inc (NASDAQ: COIN), the largest cryptocurrency exchange in the US. In what can only be described as a big win for Coinbase, the exchange is mentioned as the custodian for 8 out of the 11 firms gunning for spot Bitcoin ETF approval. Applicants partnering with Coinbase include Grayscale, ARK/21Shares, BlackRock, Bitwise, Wisdomtree, Invesco/Galaxy, Valkyrie, and Franklin Templeton.
Coinbase to Win Big from SEC ETF Approval
The United States Securities and Exchange Commission (SEC) has never approved a spot Bitcoin ETF. Since the first proposal submitted in 2013, the SEC has rejected all proposals citing fraud and market manipulation concerns.
To address the SEC’s concerns, applicants included surveillance sharing agreements (SSAs) for fraud prevention. An SSA is a contract between parties, including the regulators and crypto exchanges, to share trading and market data transparently, thereby reducing the risk of manipulation and fraud. If the SEC approves a spot Bitcoin ETF, Coinbase would be directly involved in sharing market information.
In addition to the SSAs, Coinbase will perform custody and financing functions post-approval. These functions put Coinbase as one of the biggest winners if the SEC eventually greenlights a spot Bitcoin ETF. Also, the introduction of in-kind redemptions for the ETF could boost Coinbase’s function as it would have to support the mismatch between the spot market and the ETF as the entity in control of the collateral.
Despite Coinbase’s potential win, the stock has not gained much this year. The company’s stock had a good 2023, ending the year on high notes. Over the last year, COIN climbed more than 247%, and nearly 97% in the last three months. However, the major exchange has lost 12.61% this year.
Coinbase Stock Poised for More Growth While MicroStrategy Stock Could Plunge
In further Coinbase news, Cathie Wood’s Ark Invest has consistently sold off its COIN shares. At the end of last month, Ark Invest sold 148,885 Coinbase shares worth about $27.58 million at the time. On January 3, Ark sold another $25 million worth of COIN, following that with an additional $20.6 million worth a few days later.
Regarding the bullishness around Coinbase stock, Reflexivity Research co-founder Will Clemente said the exchange’s stock could be an indicator for the crypto sector, giving some direction to crypto-related entities. According to Clemente, traditional finance players may use Coinbase stock as an “index play” if they are unsure what assets to buy into. Bitwise Chief Investment Officer Matt Hougan is also bullish on Coinbase, suggesting that their revenues could more than double.
While the near future for Coinbase is positive, MicroStrategy Inc’s (NASDAQ: MSTR) position might tell a different story. At the moment, MicroStrategy is the public company with the largest amount of Bitcoin holdings, with 189,150 BTC as of its last acquisition on December 27, 2023. In fact, MicroStrategy now holds nearly 1% of Bitcoin’s total supply. Speaking on the Unchained podcast, Blockchain Capital general partner Spencer Bogart believes some people hold MSTR as their “best proxy for Bitcoin exposure.” If this is true, these persons may sell their MSTR stock in favor of spot Bitcoin ETFs if approved by the SEC.
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