If you read the news, Coinbase (NASDAQ:COIN) stock has been . The hype has been nonstop since a federal judge of Ripple Labs Inc. in a lawsuit which had been brought against them by the U.S. Securities and Exchange Commission.
Since the decision COIN stock has fallen by over 30%. However, the company still has a market cap of over $16 billion and expected revenue for 2023 of $2.7 billion. And yet, even with Bitcoin (BTC-USD) recently trading at over $34,000, up from $25,000 at the time of the ruling, the company is forecast to post an EPS of negative 54 cents.
What’s Going On?
Since digital assets aren’t real, crypto offers a pure market. The only scarcity is an artificial one, imposed by the technology that limits supply through the mining process.
This lets greed and fear reign without worrying about grain harvests or miner strikes. 蜜桃传媒s rise on skepticism about central bank currencies like the dollar. They fall on legal uncertainty and the attractiveness of other assets.
Since 2021, cryptocurrency has been locked in another battle, over who should regulate them. This is especially true for Coinbase, , calling it an unregistered exchange and its actions illegal.
The case is now approaching . Coinbase will be able to make oral arguments against the SEC’s action . The exchange will argue the court should because the SEC lacks authority to regulate digital assets.
Coinbase says the scheduling of a hearing is . But regardless of how the court rules, the result is likely to be appealed. The real legal breakpoint on the Coinbase case comes in November of 2024 when the presidential election could usher more crypto-friendly people to positions of power. Meanwhile, Coinbase is .
New Competition
There’s also good news that could prove to be bad news.
It’s likely an Exchange Traded Fund (ETF) covering Bitcoin . A judge has ruled that Grayscale, a crypto asset manager, can convert its Grayscale Bitcoin Trust (OTCMKTS:GBTC) into a real ETF. Crypto advocates call this . It will let investors trade Bitcoin while avoiding the risks that took down or exchanges that have been .
Legitimizing the Bitcoin market is a double-edged sword for Coinbase, however. What’s good for Coinbase is also good for Fidelity, Blackrock (NYSE:BLK), Goldman Sachs (NYSE:GS) and for any other trading desk .
Legitimacy is coming when Coinbase is vulnerable. Its current . It’s due to report earnings November 2 and . That’s not a surprise though, the company’s last profit came .
The Bottom Line
Cathie Wood’s ARK funds have been . The news sent the stock down hard, from $82 a share to its present level.
, but trading systems are different from the assets being traded. A market maker should make a profit, no matter how the market is moving. Coinbase seems to be losing money at the same time it faces new competitive threats from Wall Street.
Win or lose in court, Coinbase faces a management challenge. The stock, which has been volatile based on cryptocurrency values, should trade on its ability to operate the business. Coinbase’s unique advantages are going away. Can it grow to be a profitable exchange in a legitimate market? That’s what you’re betting if you buy Coinbase stock.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
