Coinbase Global (NASDAQ:COIN) stock is trending, and shares are up on news that 20% of its float is being held short.
Moves by major institutions, including Blackrock (NYSE:BLK) and Charles Schwab (NASDAQ:SCHW), to support Bitcoin (BTC-USD) trading could also help power a short squeeze.
At the market’s opening today, Coinbase was trading at about $57.50/share, a market capitalization of $13.4 billion on 2022 revenue of $3.2 billion. Shares are up 75% in 2023.
Coinbase Conundrum
Whether the moves by institutions to support crypto trading also support Coinbase is the key question for the markets.
Coinbase holds customer coins as well as trading them. This creates the same potential conflict of interest that took down FTX last year.
EDX, the new exchange backed by Schwab, uses a non-custodial model, trading coins but holding them with a separate custodian. Bitcoin backers believe this supports the overall market, which would help Coinbase. Blackrock, which acts as a Bitcoin custodian, is creating a Bitcoin ETF but is not trading crypto directly.
Coinbase bears believe the existence of EDX will cause institutions to steer clear of Coinbase, which was sued by the Securities and Exchange Commission (SEC) in June for selling unregistered securities. Coinbase is now demanding the SEC make clear rules covering the space.
A policy hearing attended by both sides last week found no common ground. The SEC’s chief legal counsel insisted it is serving the interests of investors and fighting fraud. A Coinbase official pointed to the industry’s friends in Congress and said regulators are working against innovation.
The Third District of the Court of Appeals is now giving the SEC 120 days to respond to Coinbase’s petition for rulemaking. After that, it will rule on a “writ of mandamus” filed by Coinbase, which could order that rulemaking.
COIN Stock: What Happens Next?
Bitcoin backers are calling EDX “an inside job,” hinting at collusion aimed at giving Wall Street firms control of the crypto space.
The war between regulators and Coinbase will continue.
As of this writing, Dana Blankenhorn had a LONG position in SCHW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
