SEC Sues Coinbase. Which US Stocks Will Benefit?
It came fast and it came furious.
On Mon, 05 June SEC filed a complaint against Binance pressing a total of 13 charges.
One of the allegations claims that funds from Binance and Binance.US were commingled into an account controlled by the Changpeng Zhao-associated Merit Peak Limited.
Another allegation claims that Binance.US engaged in wash trading through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” which is owned by Zhao.
For more details on Binance lawsuit, click to read my morning post - SEC Sues Binance. Who Wins? Who Loses?. Remember to give a “Like”, “Share” & ”Re-post” ok. Rating is important (to me).
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Could it be a case of racial discrimination? SBF is caucasian. CP Zhao is asian.
Could it be a case of FTX’s political fundings support have its “privileges” ?
Whatever the case maybe, SEC chairman Gary Gensler, better have a solid alibi during trial. Otherwise he would ripped to pieces just like the Capital Hill testimonial session.
On Tue, 06 June, SEC followed up with another lawsuit.
This time it targeted $Coinbase Global, Inc.(COIN)$ alleging that:
Coinbase has (since at least 2019) made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.
Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.
SEC’s lawsuit seeks (a) civil fines, (b) the recouping of ill-gotten gains and (c) injunctive relief.
While awaiting a trial date, Coinbase's general counsel, Paul Grewal said in a statement “The company will continue operating as usual and has "demonstrated commitment to compliance."
It is plain to see why SEC Gary Gensler decided to go after the “big boys” of the crypto-world (see above diagram).
Between Binance and Coinbase, they “account” for up to 60% of crypto transactions for May 2023 alone.
Only question remains is whether SEC has sufficient “air-tight” evidence to prove SEC’s argument? One “wrong” move and Mr Gensler could be shown the door?
Stocks That May Gain From Lawsuit:
If you look sufficiently hard, you will find that there are other US stocks that offer crypto-related services as well, besides Binance and Coinbase.
It’s just that they are not the “defacto” stocks for all things crypto.
Is their fate about to change with the impending lawsuit filed against Binance and Coinbase?
A software company has invested heavily in Bitcoin and holds about 140,000 BTC (valued at $4.26 Billion) in its balance sheet.
If the SEC crackdown leads to a drop in Bitcoin price or liquidity, MicroStrategy could face losses or impairment charges on its crypto assets.
On the other hand, if Bitcoin remains resilient or rallies in spite of the regulatory pressure, MicroStrategy could benefit from its exposure and reputation as a crypto-friendly company.
(2) $PayPal(PYPL)$
Online payment giant has pivoted to enable its users to (a) buy, (b) sell and (c) hold cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Bitcoin Cash since last year.
Had its then-CEO possessed the forward-looking vision to embrace all things crypto early on in its evolution, it would not have been relegated to Tier-2 status for all things crypto.
It plans to expand its crypto services to other countries and platforms.
PayPal could benefit from the SEC lawsuit if it drives more demand for its regulated and compliant crypto offerings, especially from institutional investors who seek safety and legitimacy.
Similarly, PayPal could also suffer if the SEC decides to target other crypto platforms or services that it partners with or relies on.
(3) $ARK Innovation ETF(ARKK)$
Fund has a significant exposure to Coinbase, as it owns > 8 Million shares of COIN, making it one of its top holdings.
Fund also has stakes in other crypto-related companies such as Square, Grayscale Bitcoin Trust and Kraken.
Looking at ARKK’s past 5 days prices, it is still on the rise due to overall market’s positive sentiments.
SEC lawsuit could hurt ARKK's performance and returns if Coinbase's stock price continues to dip.
Perhaps, the chart of ARKK Funds of Coinbase holdings would provide a “clearer” picture (see below).
Just so you know, Ms Cathie Wood is still purchasing Coinbase stocks despite the lawsuit (see below).
Perhaps she doesn’t want to repeat the same “sell-out mistake” like that of Nvidia (Jan 2023)”?
Is she spot on this time round?
Do you think Coinbase stock price will continue to fall in the coming days?
Do you think you will be interested in any of the stocks that may benefit from Coinbase fallout with SEC?
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the actual growth company is Adyen, but its european massive grower, as for paypal its, revenue i would say is peaked or slowing so this maybe a value trap.
Armstrong comes out and blames the SEC. Got to love the strategy lol.
Game over for Coinbase ... given the current SEC situation ...
In Q1 2023 COIN reported total trading volume of $145B. In Q1 2022 COIN reported total trading volume of $309B. From Q1 2022 to Q1 2023 trading volume dropped off by 53%.
SEC is gonna sue a lot of tokens. This is insane!
Given that the trading volume drop at COIN was 53% from Q1 2022 to Q1 2023, the trading volume drop from Q2 2022 to Q2 2023 could easily be worse than 68%. Trading volume reported by Coingeko for Q2 for COIN is very low as well.
loaded up. Coinbase is the only exchange that is consistently asking the regulators how to do things legally. It is not coinbase fault that regulators don't even know the answer.
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Rating is very important to me. Tks!
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Might be time to buy puts, I reckon COIN is going to decay all summer
Would this be a good stock to buy and hold for about 40 years?
Great ariticle, would you like to share it?
What does the US government want to do? So crazy.
Yea.