- Coinbase share price has been slammed after the latest SEC lawsuit.
- The SEC allege that the company was offering unregulated products.
Coinbase stock price has move sideways in the past few days as investors assess the impact of last week’s lawsuit by the Securities and Exchange Commission (SEC). The shares are hovering at $50, where they have been after the lawsuit. Some investors believe that this lawsuit will have a negative implication on the company’s revenue while others, like Cathie Wood, expect it to rebound.
Implications of the SEC lawsuit
After years of investigations, the SEC filed a major lawsuit against Coinbase last week. The SEC alleged that the company is offering some illegal products in the US. Precisely, it argued that the exchange was selling unregistered securities in its platform.
At the same time, the SEC alleged that the company was providing brokerage and clearinghouse solutions in its platform. In an interview, Gary Gensler likened this to a situation where New York Exchange (NYSE) and Nasdaq started offering their exchanges. Coinbase believes that the SEC is misguided, arguing that there has been lack of clarity about these products.
It is too early to predict the outcome of this lawsuit. Some analysts believe that the lawsuit will lead to more clarity as the case goes on. As a result, Coinbase could benefit if the case is settled or if the company wins against the SEC. Besides, Coinbase is already one of the most regulated companies in the crypto industry. As a publicly-traded company, the company is audited by a big-four auditor and overseen by the SEC.
A ruling to end stacking and delisting crypto tokens would have an impact on the company since these tokens generate about 20-30% of its revenue. However, I believe that the company would still exist with products like proof-of-work coins like Bitcoin, Litecoin, and Ravencoin. In a note, an analyst told Barrons:
“This is the playbook: they wipe out certain companies and then rebuild with businesses that they feel more comfortable with and trust. The industry has reinvented itself in almost every one of these bear market cycles.”
Coinbase stock price forecast
The daily chart shows that the Coinbase share price has moved sideways in the past few days. The stock remains below the double-top level at $85.42, where it has struggled moving above earlier this year. It is also slightly above the ascending trendline shown in blue.
However, the stock has moved below the 25-day and 50-day moving averages (MA). Therefore, in the near term, there is a likelihood that the stock will have a bearish breakout as sellers target the next key support at $40.
