$COIN SEC’s New TargetAfter its stock plummeted almost 20%, Coinbase Global, Inc. (NASDAQ: COIN) faces losing more than 30% of its revenue due to the SEC’s lawsuit. With that said, COIN stock and the crypto market may be set to rebound thanks to the newly introduced draft bill in Congress that would add much-needed clarity to the crypto market. As Cathie Woof has been adding shares of COIN despite the current uncertainty, COIN stock may prove to be a profitable buy at this dip.
COIN Fundamentals
SEC Lawsuit
U.S. regulators are starting to go after more crypto companies after the biggest target, FTX, collapsed back in 2022. The SEC is claiming that COIN and Binance are trading unregistered securities in their alt-coins (non-Bitcoin or Ethereum tokens), while COIN claims that these coins shouldn’t be treated as securities.
In the event that alt-coins are treated as securities and require registration, COIN may lose up to 30% of its revenues since the process of registering securities can be cumbersome and has a risk of the application being denied. While COIN seems to be in a better position than Binance, it is still in danger of losing a lot if the SEC wins since COIN will lose a big chunk of its revenues and its stock may further plummet. Following the lawsuit announcement, COIN stock dipped more than 20%, with Bitcoin also sliding 5% before erasing almost all of its decline.
After COIN stock went down almost 20%, it has since recovered by almost 10% with Bitcoin also recovering by almost 4%. Furthermore, Cathie Wood snapped up more than 400 thousand shares after the dip across three actively managed ETFs – with ARK Fintech Innovation ETF making COIN its third-largest holding with a weighting of 5.35%.
New Government Regulations
Earlier this month, Congress introduced a new draft bill regarding crypto trading. The new draft bill proposes that cryptocurrencies offered as part of an investment contract would fall under SEC oversight, while those that qualify as commodities would be overseen by the Commodity Futures Trading Commission (CFTC).
With cryptocurrencies like Bitcoin and Ethereum, Binance’s BNB definition as securities or commodities would depend on how decentralized their underlying blockchain is, as decided by an SEC ruling. If the SEC lawsuit is an indication of what it sees as a security and what it sees as a commodity, it seems like both Bitcoin and Ethereum would be safe since the SEC excluded them from the lawsuit against COIN.
Following in the SEC’s footsteps, the UK’s financial regulator has introduced new regulations regarding crypto trading. With the new regulations, crypto trading companies will need to introduce a cooling-off period for first-time investors starting October 8, 2023, and it will also ban “refer a friend” bonuses to ensure those who buy crypto understand the risk.
With so much uncertainty in the cryptocurrency market, the Binance and COIN lawsuits, combined with the newly introduced draft bill, may provide much-needed clarity to crypto trading which will benefit the whole industry in the long term.
COIN Financials
In its Q1 2023 report, COIN’s assets increased 56% QoQ from $89 million to $139 million, and its cash and cash equivalents increased 13% QoQ from $4.4 million to $5 million. COIN’s total liabilities increased by 62% QoQ from $80 million to $130 million.
Revenue decreased 36% YoY from $1,164 million to $736 million. Operating costs decreased almost 48% from $1,720 million to $896 million resulting in operating loss decreasing 77% YoY from $554 million to $123 million which amounted to a net loss of $79 million – an 81% decrease YoY.
Technical Analysis
COIN stock’s trend is neutral with the stock trading in a sideways channel between $56.8 and $63.26 which has been broken following the SEC’s lawsuit against the company. Looking at the indicators, the stock is trading below the 200, 50, and 21 MAs which are bearish indications. Meanwhile, the RSI is neutral at 40 and the MACD recently turned bullish.
As for the fundamentals, COIN stock just witnessed a catalyst in the SEC lawsuit against it. The result of both the SEC lawsuit and the new crypto bill will be important future catalysts for COIN. Given that the stock is trading near support and is yet to retest the lower trendline, the current PPS could be a good entry point in COIN stock.
COIN Forecast
With the SEC lawsuit against COIN, the crypto trading company is at risk of losing more than 30% of its revenue. The SEC lawsuit, while bad for COIN, may provide more clarity about the crypto market, which can be good in the long term for the crypto industry. Furthermore, the new Congress draft bill can prevent more lawsuits of this kind from happening in the future since it will introduce clear regulations regarding cryptocurrencies and crypto trading companies. The crypto market is currently in disarray, but Ark Invest’s addition of new COIN shares after the lawsuit indicates that COIN stock may still be worth keeping an eye on.
