Coin base’s legal battle with SEC sparks investor concerns over stock volatility

Coinbase, the leading cryptocurrency exchange, may experience short-term price fluctuations due to its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC) and potential volatility in Bitcoin’s price, according to a recent assessment by Oppenheimer analyst Owen Lau.

Regulatory uncertainty impacts Coin base stock

Coinbase, a major player in the cryptocurrency industry, is currently facing a lawsuit brought forth by the SEC, alleging violations of securities laws. The ongoing legal uncertainty surrounding this case has raised concerns for investors, leading to potential near-term volatility in Coinbase’s stock price, which currently stands at $125.

In a recent interview with Yahoo Finance, Oppenheimer analyst Owen Lau emphasized the regulatory overhang that continues to loom over Coinbase. Lau noted that the absence of clear cryptocurrency regulations in the United States has created a sense of uncertainty for market participants, contributing to the potential for price fluctuations in Coinbase stock. 

He pointed out, “There is still a regulatory overhang; we still don’t have clear regulations in the United States right now.”

Optimism regarding Coin base’s lawsuit outcome

Despite the regulatory challenges, there is a degree of optimism among some analysts regarding Coinbase’s lawsuit against the SEC. Bloomberg litigation analyst Elliot Stein has predicted a 70% chance that Coinbase will emerge from the legal proceedings unscathed, with the lawsuit being fully dismissed. 

Such a positive outcome could potentially alleviate some of the short-term pressures on Coinbase’s stock.

Coinbase’s stock has experienced notable price swings in recent months. In the past 30 days, it has seen a decline of approximately 28%, raising concerns among investors. However, it is essential to put this decline into context, as the stock has still managed to achieve an overall gain of approximately 67% in the past three months.

Lau attributes this overall increase to the surge in Bitcoin’s price towards the end of 2023. There was growing optimism in the market that the U.S. SEC would approve a spot Bitcoin Exchange-Traded Fund (ETF), which indeed materialized on January 10. The anticipation of this milestone contributed to Coinbase’s stock performance.

Bitcoin’s influence on Coinbase stock

Bitcoin, often considered the flagship cryptocurrency, plays a significant role in influencing Coinbase’s stock price. The recent decline in the price of Bitcoin, which has fallen by approximately 10.37% over the past two weeks, has added to the challenges facing Coinbase. At the time of publication, Bitcoin is trading at $41,863.

Lau anticipates that Bitcoin may continue to experience short-term price fluctuations. He noted, “I do think that in the near term, there will be some downward momentum on Bitcoin until the next catalyst.” The volatility in Bitcoin’s price can directly impact investor sentiment and, consequently, Coinbase’s stock performance.