While many legal onlookers share Stein’s vision of an overall Coinbase victory, they’ve voiced skepticism over an early dismissal. “Coinbase had strong arguments on the SEC’s main claims,” Stein told Fortune. On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum.

The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. While user growth is a pressing matter, Coinbase also needs to supplement transaction revenue, a significant part of its income is derived from facilitating crypto trades. In Q3, despite the crypto market’s solid performance, translation fees dropped 21%. That said, even with its recent increase tied to France’s regulatory clearance, COIN stock still rests 55% below its 2021 peak. Coinbase and Bitcoin (BTC-USD) are closely correlated, with Coinbase’s value largely tied to transaction fees, which are linked to the performance of the crypto sector. With a weighting of nearly half the sector, where Bitcoin is headed tends to drive a significant amount of the sentiment around this space, and therefore Coinbase’s valuation.

Howey’s definition of an investment contract was often cited within the debate over security tokens versus utility tokens. Fundamentally, it further proves that an investment contract involves shelling out capital, expecting to generate income or profit through others’ efforts. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Amid all the chaos that took place in the cryptocurrency industry over the past couple of years, Coinbase has been a stalwart. Credit for that resilience goes to the founder and CEO, Brian Armstrong, who from the beginning made it a priority to work within the regulatory framework and with lawmakers, unlike many other crypto companies.

1. In 2024, as the company is making strides toward breakeven, the only favorable trend for Coinbase is simply positive profits.
2. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
3. According to theblock.co, Coinbase’s trading volume in December was $70 billion.
4. Regulatory uncertainties and unpredictable trajectories should be a cause for caution for eager investors.

When purchasing securities on the primary market, a purchaser pays a company to build up their project in exchange for a reasonable expectation of profits. But Coinbase is arguing that as assets on their exchange aren’t directly from the issuer, trades are secondary market transactions. https://cryptolisting.org/ The SEC’s lawsuit alleges digital tokens offered by Coinbase, including Cardano and Solana, are unlicensed securities. If the agency prevails, it could poses an existential threat to the entire industry by requiring crypto exchanges treat digital tokens like stocks and bonds.

It’s my view that Coinbase could be the best way to play the crypto sector, but it’s still high risk. This is a stock I’d put in the “buyer beware” camp, at least for now. The approval of Bitcoin ETFs would be a happy ending for Coinbase. However, despite Coinbase’s performance in the previous year and due to crypto’s unpredictable nature, there will always be a risk with altcoins. Regulatory uncertainties and unpredictable trajectories should be a cause for caution for eager investors.

I have to say, the company’s financials are difficult to digest, and many in the market may take this view. Analysts just don’t seem that convinced that a “rip your face off rally” is set to be unleashed in the crypto sector. The recent spot ETF approvals should have led to an expanded interest in the digital property and boosted Coinbase’s sales diversification. However, a well-known pattern of “buy the rumor, sell the information” has ensued, resulting in a 20% drop in Bitcoin prices following the ETF approval.

This top crypto brokerage and exchange saw its shares skyrocket in 2023.

In 2024, as the company is making strides toward breakeven, the only favorable trend for Coinbase is simply positive profits. In the case of the SEC vs Coinbase, the SEC sued the platform for operating as a broker, exchange, and clearing agency for specific securities like Solana, Polygon, Cardano, and Near Protocol. Coinbase argued these are commodities much like to BTC and ETH, referencing Beanie Babies and Baseball cards, which are classified as commodities by the SEC. On January 10, interesting and significant developments came out of the SEC approval of eleven Bitcoin ETFs. The SEC charged Coinbase for trading unlisted securities, which caused a fiery back-and-forth between these two parties. The debate revolved around the Supreme Court’s Howey decision back in 1946, which emphasized the Securities Act of 1933.

Accordingly, investors will be paying close attention to how the overall market performs this year, and where margins come in (particularly for the company’s higher-growth services segment). On the other hand, investors who are bullish on the future of the crypto industry may not find a better way to gain solid exposure to the asset class. Coinbase could essentially be viewed as a bet on the growth of the overall market. But again, it all comes down to your risk tolerance and cryptocurrency conviction.

Value Stocks to Buy as the Market Shifts from Growth to Value

This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. It’s a persuasive argument because it makes the distinction between primary and secondary market transactions, he added.

After a terrible 2022, investors appear to be much more optimistic about digital assets. In that ruling “the judge found it problematic that purchasers on the public exchanges didn’t know who was on the other side,” he told Fortune. In these types of transactions, there is no “meeting of minds” one would typically coinabj expect from a contractual relationship, he added. Now, some suggest that Coinbase’s negative momentum isn’t something to worry about. This is a central player in providing the “rails” for the crypto sector. And if a rally that’s stronger than many think unfolds, perhaps this stock is valued attractively.

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But is Coinbase a magnificent crypto stock that investors should consider buying right now? Coinbase Global (COIN 6.09%) rode this wave of enthusiasm to new heights. The cryptocurrency stock soared 391% in 2023, a gain that trounced the Nasdaq Composite Index, although it has fallen 26% this year (as of Jan. 22). Despite efficiency gains and cost reductions, the company still recorded a net loss.

CoinJar makes buying crypto easy

Fast forward to 2024, Coinbase declined by 25%, which prompted JPMorgan to downgrade the stock with an $80 target price and an underweight rating. In the most recent quarter, sales from subscriptions and services rose by 59% year over year to represent 52% of the overall company’s revenue. That’s why there’s been tremendous focus on bolstering Coinbase’s subscription and services offerings.

This should also make the business easier to manage, as executives will have better visibility into the company’s future revenue streams. Of course, focusing extensively on delivering a superior user experience has made Coinbase a top cryptocurrency brokerage and exchange operator among both individuals and institutions. The recent approval of 11 spot Bitcoin exchange-traded funds (ETFs) proves this. The vast majority of asset managers that launched this product use Coinbase as the custodian (more on this below), indicating its industry position as a trusted partner. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.