The SEC’s reported probe of Coinbase caused a further decline in the company’s stock price and trading volume.
On-chain data shows that the trading volume on Coinbase slumped by 9% following reports the platform faces a probe from the Securities and Exchange Commission(SEC). According to sources, the exchange is being investigated to determine whether it inappropriately lets Americans trade digital assets that should have been registered as securities. Following the news breakout, the metric declined from $2.2 billion to $2 billion.
Chart showing the 7day moving average of Coinbase daily trading volume. Source: TheBlock
The chart shows that the daily trading average on Coinbase has fluctuated significantly since January 2020. It saw a significant surge at the start of 2021, going from less than $2.5 billion to over $5 billion. Subsequently, it declined to $2.5 billion in April 2021 before hitting an all-time high of $8.8 billion in May 2021.
Since then, it has continued to swing wildly, slumping to $1.3 billion in July 2021 amidst the crypto market capitulation. As Bitcoin surged to its all-time high in November 2021, the trading volume increased, reaching $6.85 billion. Coincidentally, Coinbase has continued to record declining trading volumes as the market capitulated and a bear market ensued.
Coinbase Stock Price Declines By 21%
Coinbases’ trading volume was affected by the investigation reports, and its stock price was also significantly impacted. At the close of the trading day yesterday, COIN had slumped by more than 21%, from $67 to $52.9 this week.
YTD price Chart for COIN. Source: Yahoo Finance
This year alone, amidst the general downturn in the financial markets, Coinbases’ share price has declined by over 75%. The share price was $250.15 at the start of the year, but it slumped to $170 at the end of January. February brought a relief bounce, with the price peaking at $214.5 before declining to $153.1 at the start of March.
Subsequently, the coin share price rallied again before seeing its most significant fall in the year. It declined by over 70%, from $204.5 in March to $53.7 in May, after it missed revenue expectations fo the first quarter. Since then, it has continued to range before the 21% drop this week.
The decline of Coinbases’ stock has gone against the previous expectation of analysts who expected a strong performance. Jim Cramer, a hedge fund manager and a popular TV personality tweeted several months back that he expected the stock to hit $4475. His predictions have proven way off the mark now. However, he weighed in on the SEC investigation, saying he had expected the probe for a long time.
The SEC’s Probe
Inside sources revealed that Coinbase has come under more scrutiny from the SEC since it increased the number of tokens traded. However, they reiterated that the probe predates the recent investigations of the company over insider trading by a former Coinbase employee.
With digital currencies falling from their record highs and wiping out billions in market value, the calls for regulation of cryptocurrencies have grown louder. However, there is a raging controversy over how to classify digital assets. Generally, if cryptocurrencies are commodities, the Commodity Futures Trading Commission(CFTC) would oversee them. However, the sale of tokens with mostly speculative value is how many cryptocurrency projects are financed.
Accordingly, SEC’s Chair Gary Gensler has called for full regulation for the industry to safeguard investors. He believes that many of these assets have attributes of securities. On her part, Coinbase has refuted claims that it offers securities on its platform for trading. The company’s chief legal officer Paul Grewal reiterated this stance on Twitter
The current spat would not be the first time Coinbase and the SEC would clash over digital assets. The exchange’s plans to start a crypto lending program ended after the regulatory body threatened to sue them if they went ahead. The platform has, however, called for more precise rules for trading from the authorities.
Do you think the SEC investigation of Coinbase will cause a further decline in the company’s trading volume and wshare price? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
