Topline
Shares of Coinbase, the largest American cryptocurrency exchange, are up more than 25% to a 14-month high since a major Thursday ruling on crypto regulation, which many industry players interpreted as a major win, though one skeptical analyst says bullish investors should pump the brakes.
Key Facts
Coinbase stock has added nearly $5 billion in value since a federal judge said Thursday that Ripple Labs, a fellow crypto company facing a similar Securities and Exchange Commission lawsuit, did not violate regulatory laws by selling its own token, apparently siding with the view that digital assets are unregistered securities that should be regulated similarly to publicly traded stocks.
Despite investor fervor, the rally in response to this development “was not warranted,” Berenberg analysts led by Mark Palmer wrote in a note to clients, urging investors to take a “close reading of the ruling.”
Palmer argues the court did not outright agree with the notion that cryptocurrencies are not securities and thus transactions of the assets do not violate federal laws.
The analyst, whose $39 price target for Coinbase implies more than 60% downside, pointed to a footnote to the decision stating that whether or not a digital asset transaction qualifies as a securities transaction “depends on the totality of circumstances and the economic reality of that specific [investment] contract, transaction or scheme.”
Shares of Coinbase have gained 105% since the SEC sued the company June 6 for allegedly “unlawfully facilitating the buying and selling of crypto asset securities.”
Chief Critic
Thursday’s ruling helped “tip the scale even more toward a favorable outcome for Coinbase” in its legal battle with the SEC, Canaccord analyst Joseph Vafi wrote Thursday, explaining the exchange has a “good chance of [securing]
a legal victory and vindication for the company.”
Key Background
Bitcoin spiked to as high $31,762 on Thursday, hitting its highest price in over a year. Bernstein analysts led by Gautam Chhugani declared the decision to be a “landmark judgment” that could “significantly shift the regulatory cloud over the crypto industry,” predicting institutional investors may soon “reconsider” exposure to crypto as regulatory concerns ease. Supporting Chhugani’s thesis are recent applications from financial stalwarts like BlackRock and Fidelity for a spot bitcoin ETF.
XRP, Coinbase Surge As Investors Take Favorable View Of Ripple Ruling (Forbes)
Crypto Industry Secures Early Victory in Legal Battle With Regulators (New York Times)
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