Proactive Investors - Existential regulatory threats don’t appear to be phasing Coinbase Global Inc (NASDAQ:COIN) investors at the moment.
Shares in the Nasdaq-listed cryptocurrency exchange have rallied nearly 80% since plummeting to a 2023 low on June 6.
On that day, the US Securities and Exchange Commission (SEC) slapped the exchange with a lawsuit on charges of securities law violations.
The question of whether some cryptocurrencies constitute unregistered securities has been an issue since 2020, but has come to a head this year with the SEC fronting a full-on assault against Coinbase, Binance, Kraken and other major crypto exchanges.
According to the SEC’s complaint, since at least 2019, Coinbase has made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities.
Successfully suing Coinbase for these violations could severely limit the company’s revenue streams, so why is Coinbase in the middle of an impressive stock market rally?
After all, even with the regulatory threats aside, cryptocurrency trading volumes have tanked this year, causing downward pressure on Coinbase’s bread and butter: Transaction fees.
Bitcoin pumps, BlackRock (NYSE:BLK) enlists Coinbase
Firstly, while cryptocurrencies have seen a sharp decline in trading volumes, bitcoin’s spot price has been on a roll.
Year to date, the benchmark cryptocurrency is up over 70%, while ether (ETH), the world’s second-largest cryptocurrency, is up over 45%.
Though Coinbase deals in dozens of cryptoassets, bitcoin and ether comprise more than half of all trades, according to 2022 financials.
The other big reason behind bullish investor sentiment is its potentially lucrative tie-up with the world’s largest asset manager BlackRock.
BlackRock is fighting to get its spot bitcoin exchange-traded fund approved by the SEC, and Coinbase may play a crucial part in that.
BlackRock’s first application was knocked back due to “inadequate” safeguards against potential fraud and manipulation in the unregulated crypto markets.
To assuage the SEC’s fears, BlackRock has enlisted Coinbase as a surveillance-sharing partner.
Fidelity and the Chicago Board Options Exchange have also named Coinbase in their bitcoin spot ETF applications.
Exactly how lucrative this will be for Coinbase is unknown, but with tens of trillions of dollars in combined assets under management, these financial institutions have deep pockets to draw from.