Coinbase shares skyrocketed on Tuesday, following a court decision in relation to a bitcoin spot ETF that could be a tailwind for the crypto exchange. Additionally, Coinbase was set to submit a reply to the SEC's reply to the motion to dismiss by the end of the day on Tuesday. Grayscale Bitcoin Trust and MicroStrategy, which are both exposed to the crypto industry, also witnessed impressive gains of double-digit percentages in the morning.
Shares of Coinbase, a cryptocurrency exchange, experienced a 6% increase on Tuesday driven by the potential for approval of a bitcoin spot exchange-traded fund. This could be a significant moment for the business, which is currently being sued by the Securities and Exchange Commission in a Manhattan federal court. Additionally, shares of Grayscale's Bitcoin Trust rose by 5% in Tuesday morning trading, a result of the official confirmation from a federal appeals court judge that the SEC must review the organization's ETF proposal.
Coinbase's stock is generally reflective of the performance of the crypto market in general. It is one of the top crypto custodians and was chosen as the custodian of a few proposed ETFs, including one from BlackRock.
The SEC has received a great amount of criticisms from industry players and Congress over its supposed "regulation-by-enforcement" practices. Some of these people contest that the company is punishing cryptocurrency exchanges due to the failure of FTX. Nevertheless, some are of the view that a number of cryptocurrencies are classified as securities and the SEC's jurisdiction is clear.
The friction over jurisdiction has influenced the prices of stocks exposed to crypto transactions. Coinbase's stock has gone up by 119% since the start of 2021, but is still not back at its pre-crypto-winter level. The same can be said of MicroStrategy, whose shares rose 12% on Tuesday, but are significantly down from its 2022 levels.
Coinbase will be filing an appeal today. In August, the company took action to challenge the SEC's claims by highlighting that the assets in inquiry are not investment contracts according to the Howey Test and that the SEC is beyond the limitations of its authority. The SEC then argued that Coinbase conducted transactions involving investment contracts. Coinbase's response is due in federal court at the end of the day.
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