Bitcoin undoubtedly stands to benefit from Grayscale’s court victory against the SEC, but some on Wall Street are concerned the ruling doesn’t offer as much hope for Coinbase . On Tuesday the U.S. Court of Appeals for the D.C. Circuit ruled that the Securities and Exchange Commission was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust, known by its ticker GBTC, into an ETF. Many see the news as a strong signal that a U.S. bitcoin ETF will inevitably be green lit, which would help boost adoption of bitcoin. However, the ruling could present more headwinds for Coinbase – the biggest U.S. crypto exchange, the first crypto company to go public and one of the oldest crypto services providers in the industry. While it could be a tailwind for crypto prices – which could translate to more activity on Coinbase – ultimately, greater adoption of bitcoin could lead to greater competition among services providers. “It is not immediately clear to us that a successful spot bitcoin ETF launch should translate into a P & L benefit for Coinbase,” Benjamin Budish, an analyst at Barclays, said in a note Tuesday. “If crypto trading transfers away from trading Coinbase directly and into ETFs (which, for many investors, might be the preferable way to get exposure), trading activity at Coinbase could decline further.” Coinbase shares rallied nearly 15% on Tuesday following the news, but the stock was down nearly 1% in trading Wednesday. Bitcoin rose 7% on Tuesday. COIN YTD mountain Coinbase shares year-to-date performance. Mizuho said although the ruling gets the market one step closer to seeing a bitcoin ETF launch, that would “further commoditize bitcoin trading in the U.S.” “Nearly 40% of COIN’s transaction revenue emanates from bitcoin trading,” Mizuho’s Dan Dolev said. “We believe a bitcoin ETF could increase competition and put pricing pressure on retail take rates. Plus, COIN’s reliance on bitcoin revenue has only increased, from 31% of transaction revenue in 2Q22 to nearly 40% in 2Q23.” Dolev also noted, however, that the SEC losing a crypto case “adds momentum to the prospects that COIN may prevail in its ongoing legal battle with the SEC regarding alt-coins and staking.” Berenberg Capital Markets analyst Mark Palmer called any readthrough from Tuesday’s ruling to the SEC’s case against Coinbase “misguided.” “We would not be surprised if the company’s potential involvement in those ETFs were to serve as part of the SEC’s reconfigured arguments for rejecting the applications,” Palmer said in a note. “Investors gauging any potential benefit to COIN from its role in the would-be ETFs should also consider the portion of the company’s revenue that appears at risk due to the SEC lawsuit and other regulatory actions.” —CNBC’s Michael Bloom contributed reporting.
This story originally appeared on CNBC
