Coinbase stock has held up amid the regulatory crackdown on Crypto, Binance
Coinbase Global shares fell amid a decline in digital assets on Tuesday, but shares have still shown some resilience despite continued regulatory pressure on the crypto industry.
While Coinbase (ticker: COIN ) stock often moves in step with digital asset prices, shares of the crypto broker had risen as much as 2% on Tuesday, basically staying in the middle of a broader decline. However, shares fell 0.6% in afternoon trade as Bitcoin also fell 0.6%. The
S&P 500
was down 0.5%, by comparison.
Fear gripped the crypto landscape after the Commodity Futures Trading Commission filed a lawsuit against Binance on Monday. The commission claimed that the world’s largest crypto exchange violated rules that require futures and other derivatives to be traded on regulated platforms. Binance said it was “disappointed” by the case and that it would “continue to cooperate with regulators in the United States and around the world.”
Overall, Coinbase stock’s resilience and outperformance in the face of these pressures is remarkable. Shares are still up more than 75% so far this year, although the stock fell sharply last week after the company disclosed looming SEC charges. Bitcoin lags Coinbase shares, and the cryptocurrency is up 64%, according to Dow Jones Market Data. The S&P 500 is up just 3% in 2023.
But any gains in Coinbase stock aren’t as simple as investors bidding up the stock due to pressure on a rival.
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Coinbase and Binance are both crypto exchanges, but the former mostly offers easy buying and selling of digital assets, largely focused on US retail investors. Based offshore, Binance is home to the world’s most liquid Bitcoin futures market, which is the largest market in all of crypto trading.
Pressure on Binance does not necessarily benefit Coinbase. Indeed, the CFTC investigation of Binance only underscores how much US regulators are cracking down on crypto companies at large. It was only last week that Coinbase said it expected charges from the Securities and Exchange Commission. Overall, the pattern of fees spreading to other companies is not positive for Coinbase.
The case against Binance – which focuses on derivatives – also bodes poorly for Coinbase, which has been pushing to diversify its business away from its core crypto-trading business to include more subscription and service-based revenue. Part of this diversification has included Coinbase dipping its toes into derivatives.
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However, investors remain optimistic about crypto, with both Bitcoin and Coinbase shares rising amid expectations that the Federal Reserve will be more accommodative on monetary policy. Traders hope that the era of high interest rates may soon end, which could mark a return to the looser economic conditions that sent Bitcoin on its last bull run in 2020.
And for Coinbase stock, regulatory headwinds generally appear to be falling their way — at least for now.
Write to Jack Denton at [email protected]
