Bankless: Why Did Coinbase Stock Surge? What’s the Future Trend?
The Federal Reserve raised interest rates by 25 basis points, the Coinbase class action lawsuit was dismissed, and Powell's conservative speech all brought good news for COIN.Original Title: 《Is Coinbase stock up only from here?》
*Original Author: * Jack Inabinet, Bankless
*Compiled by: Qianwen, * ChainCatcher
Coinbase (COIN) stock surge is one of the hottest topics in the TradeFi sector over the past week.
After the market opened on Wednesday, the cryptocurrency stock surged by 55%, reaching an astonishing 80% increase from its local low. Since the stock bottomed out at $31 on January 6, COIN has seen an incredible rise of 179%.
*Source: * TradingView
The surge in COIN stock can be attributed to two main reasons:
- The Federal Reserve's conservative remarks
- Positive news on the legal front
Federal Reserve Sends Positive Signals
The broader market (including stocks, cryptocurrencies, forex, and bonds) rebounded as the Federal Reserve did not deliver catastrophic news.
The Federal Reserve raised short-term interest rates by 25 basis points, marking the smallest overnight rate increase since March 2022 to curb inflation.
*Source: * Forbes
The Federal Open Market Committee (FOMC) indicated a continued increase in the federal funds rate, stating that public health crises or overseas conflicts are no longer the main drivers of inflation. Chairman Powell noted that inflation is still ongoing and expressed concerns about the stickiness of core services inflation, excluding housing. Although inflation has eased in certain categories, Powell emphasized that commodity-driven inflation is cyclical, reinforcing the Fed's determination to curb inflation during the rate hike cycle and prevent consumers from developing long-term inflation expectations.
The 25 basis point increase by the Fed and Powell's conservative remarks provided positive news for COIN.
Coinbase Class Action Lawsuit Dismissed
The rebound in Coinbase's stock may be due to the dismissal of a class action lawsuit against the exchange and its CEO.
The lawsuit claimed that the cryptocurrency exchange and its controller, Armstrong, violated multiple sections of the Securities Act of 1933 and the Securities Exchange Act of 1934 by not registering as a broker and profiting from the sale of unregistered securities.
The core argument of the plaintiffs is that the tokens on Coinbase are securities, and transactions occur between consumers and the exchange, rather than on a peer-to-peer DEX.
Source: U.S. District Court for the Southern District of New York.
In dismissing the case, the court did not address whether the tokens are securities. The court did not make a determination on this classification, but the dismissal is valid regardless of whether the financial instruments listed and traded on the platform are considered securities.
The court noted that the plaintiffs' amendments to the lawsuit "added many allegations that directly contradict their original complaint," and that the amendments "did not [identify] any specific corrections or supplements, let alone rectify the deficiencies in their claims under the Securities Act and the Exchange Act."
The court's ruling essentially supports Coinbase's user agreement, which portrays the exchange as an agent of the users, claiming that the company has no ownership or other interests in the digital assets held or traded on the platform.
Source: U.S. District Court for the Southern District of New York.
What Other Factors Currently Affect COIN?
1) If signs of escalating inflation appear, the Federal Reserve may reverse course and raise rates more aggressively than expected.
2) There is currently no information to predict the eventual changes in the federal funds rate. The Summary of Economic Projections (SEP) will be updated at the next FOMC meeting in March.
3) Although the lawsuit was dismissed, there has been no clear determination on the regulatory classification of tokens.
4) The lawsuit was indiscriminately dismissed in state court, but Coinbase faces many similar class action lawsuits in various jurisdictions.
5) The SEC v. Wahi case is still ongoing. This criminal case accuses a former Coinbase manager of collaborating with others to commit insider trading; a guilty verdict could provide the SEC with an opportunity to regulate tokens as securities.
The future trajectory of COIN remains to be seen.
