What happened
Shares of the large crypto exchange Coinbase (COIN 9.96%) traded roughly 11.7% higher today in the final hour of trading despite a very mediocre day for the market and a down day for Bitcoin as well.
So what
There are a few reasons why shares of Coinbase might explain the stock’s move today. For one, Cathie Wood’s fund Ark Invest recently disclosed that it continued to purchase shares of Coinbase.
The fund bought more than $38 million worth of the stock in February and has clearly become very bullish. While Wood and Ark’s performance has been up and down since the pandemic started, sometimes notable investors can trigger a rally.
But investors also seem to be digesting the increased regulatory scrutiny around crypto and taking it in stride. Recently, the Securities and Exchange Commission (SEC) has come down on certain crypto-staking programs and stablecoins, which are digital assets pegged to a commodity or currency. Coinbase announced earlier today that it would delist Binance USD on March 13 after the SEC and state regulators ordered the crypto company Paxos to stop issuing the stablecoin.
In its annual regulatory filing released yesterday, the popular online brokerage Robinhood disclosed that it has been subpoenaed by the SEC in relation to its crypto operations, but this doesn’t seem to have spooked investors.
Now what
It’s hard to say what, if anything, is moving Coinbase higher today, but there could be some kind of regulatory angle.
Ultimately, while it is not an easy environment, I do believe Coinbase will be here long term because I think Bitcoin and other major cryptocurrencies are here to stay as well.
Currently, the company is in the best position of any crypto exchange to successfully navigate the crypto winter. Long term, it is going to need to keep diversifying its revenue to account for potential further fee compression on retail trades if it truly wants to succeed. I’d rate the stock as hold right now.
Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
