Coinbase vs. SEC

January Update 3

Good Morning & Happy Friday! Coinbase and the SEC continue to debate the legality of calling cryptocurrency a security in a case that some believe could determine the future of the entire crypto industry. Check out the latest updates straight from the courtroom from Axios.

SEC’s Argument: Crypto assets are securities “because people buy them with the expectation that the teams that create them will do a good job building around those assets, which will drive up the value of the token.” They made many references to the ‘ecosystem’ that people are buying into when they purchase a cryptocurrency.

Coinbase Defense: Coinbase is a secondary marketplace for crypto & no one [trader] can sue them just because the issuer of cryptocurrency does a bad job, which means there is no investment contract (i.e., it’s not a security). Furthermore, buying something and hoping its value goes up and betting on the ‘ecosystem’ of a product ‘could be said about very nearly everything,’ including coffee and bitcoin. This is especially true for collectables such as Beanie Babies.

The Judge’s Dilemma: A judge is meant to enforce the law, not create it (that duty is reserved for Congress). While the SEC claims it is not talking about collectibles but just crypto, if the judge rules in such a way, it could open up the doors inadvertently for similar treatment of a number of other assets, such as collectibles. As Judge Katherine Failla has said, "I recognize that I have a lane that I should be staying in." She has previously lamented this decision is better suited for Congress than the courts.

What do you think?

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Bitcoin ETFs Have Listed – Why is Bitcoin Not Higher?  

In the run-up to the 11 Bitcoin applications being approved last week, there was quite a lot of speculation on how listing a Bitcoin ETF might impact the price of Bitcoin.  Here we are a week later and after topping out at $48,600, we are now down below $42,000 as we go to press.  What happened?  

For anyone who has been following us, we have used the old Wall Street adage, ‘buy the rumor, sell the fact’.  In other words, when the rumors of these ETF being approved were circulating, we saw Bitcoin’s price rally.  And once the SEC announced the approval of the ETFs, all of the news was more or less priced in.  Although there are a multitude of factors that are driving Bitcoin prices, we think there are a few that are worth mentioning.