Coinbase Global Inc. shares were surging in Tuesday trading after a federal appeals court delivered a favorable ruling related to a bitcoin exchange-traded fund.
A Washington, D.C., Circuit Court of Appeals judge said Tuesday that the Securities and Exchange Commission was wrong to turn down Grayscale Investments’ application for a spot bitcoin ETF, calling the SEC’s decision “arbitrary and capricious.”
See more: First bitcoin ETF must be reconsidered by SEC, court rules
Numerous other institutions have applied for spot bitcoin ETFs, and Coinbase
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has the potential to play a role in them.
Its shares were gaining 13% in midday trading Tuesday.
Don’t miss: Bitcoin jumps after U.S. court ruling clears way for first ETF investing in the crypto
“This is largely a knee-jerk reaction and short covering, in our view,” Mizuho analyst Dan Dolev wrote in a note to clients. “However, the SEC losing a crypto case adds momentum to the prospects that [Coinbase] may prevail in its ongoing legal battle with the SEC regarding alt-coins and staking.”
See more: SEC charges Coinbase for illegally operating an unregistered securities exchange
Still, Dolev wasn’t so sure that the bitcoin-ETF development would end up helping Coinbase.
“The launch of a Bitcoin ETF further commoditizes Bitcoin trading in the U.S.,” he wrote. Almost 40% of Coinbase’s transaction revenue stems from bitcoin trading, he said, so “a Bitcoin ETF could increase competition and put pricing pressure on retail take rates.”
Dolev has an underperform rating and a $27 price target on Coinbase shares.
More from MarketWatch: Here’s why Coinbase’s new Circle arrangement could be a financial positive
Shares of bitcoin-mining names Riot Platforms Inc.
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and Marathon Digital Holdings Inc.
MARA,
were each rallying sharply as well Tuesday, with Riot up 15% and Marathon up 24%.
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