Coinbase shares fall by 21% after SEC launches a probe on their listing of new coins. The securities and exchange commission says that the coins listed by Coinbase could be securities. However, the exchange is confident that it is not the case and that its listing process is rigorous and has been reviewed by the SEC. The timing of this couldn’t be worse, as even a Coinbase manager has recently been caught for insider trading over the recently listed coins on Coinbase.
Coinbase shares tank by 21%
Coinbase had its IPO in 2021, and since then, the price of Coinbase’s shares has been down more than 84%. The current price of Coinbase’s share is $52.93, down from $67.07 the previous day. The fall in Bitcoin and Ethereum’s price had already negatively impacted Coinbase, and now a prolonged investigation could totally ruin its share price.
Coinbase seems confident that it will not face any issues and also looks forward to working with SEC on the matter. However, until things clear out, there will be selling pressure on Coinbase’s shares. The SEC claims that out of 25 tokens listed on Coinbase, around 9 are securities.
It could be very well plausible that the SEC has changed its definition of securities yet again. If that is the case, Coinbase will be in deep trouble. Right now, the most we can do is use the Howey test to check whether a token is a security or a commodity. It asks the following questions:
- Is money involved while acquiring the token?
- Is a return or profits expected in the future?
- Does the money from buying the token go towards a common group or company?
- Is the profit derived from the effort of other people?
If the answers to all these questions are yes, then the cryptocurrency can be classified as a security. In the case of Bitcoin and Ethereum, the SEC has said they are commodities.
What happens now?
Until the probe ends, we cannot say much about what is going to happen with Coinbase. It is plausible that their share prices will continue to fall or won’t rise at the least. Another important thing to see is how the SEC handles the situation if the listed tokens do come out to be securities.
What are your thoughts as Coinbase shares fall by 21% after SEC launches probe? And do you think that the security & commodity question is becoming a big issue for exchanges? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.