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Coinbase, Robinhood shares are lower despite bitcoin ETF approval

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Coinbase, Robinhood shares are lower despite bitcoin ETF approval
June 06, San Aneldo, California The Coinbase logo is shown on a screen in this picture illustration taken on June 6, 2023, in San Anselmo, California. In response to Coinbase’s purported violations of securities laws by operating as a clearinghouse, broker, and exchange without first registering with the SEC, the SEC has filed a complaint against the cryptocurrency exchange. (Photo Illustration via Getty Images / Justin Sullivan))

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Sullivan, Justin | Getty Images
As investors assess the potential impact of the U.S. legalization of bitcoin exchange-traded funds on cryptocurrency trading platforms, shares of Coinbase and Robinhood fell on Thursday.
In early trading, both CoinbaseTM and RobinhoodTM saw losses of more than 1%. The session began with them trading higher.

The Securities and Exchange Commission adopted regulations on Wednesday that permit the introduction of bitcoin exchange-traded funds (ETFs) in the United States. Investors in the cryptocurrency field have been eagerly awaiting this announcement because they believe it would give greater legitimacy to an unstable industry and asset class.

COIN wavers
In an interview that aired on Thursday, Coinbase CEO Brian Armstrong told CNBC’s Andrew Ross Sorkin, “This is a monumental step for the crypto industry.” “There’s 52 million Americans who have been using crypto over the past decade, and I think they’ve been waiting for some kind of acknowledgment from the government, and the SEC in particular, that this asset class is here to stay — and they finally got that.”

Since the spot bitcoin ETF provides investors with a simpler option to invest in cryptocurrencies, there is some worry that it may put pressure on Coinbase in the future.

“We see the impact of a Bitcoin ETF as having both positive and risky elements for Coinbase, but given the appreciation of Coinbase’s stock price, we see the risks as more relevant to shareholders,” Kenneth Worthington, a JPMorgan analyst, said.

“On the positive side, we see Coinbase as the custodian of choice for Bitcoin ETFs, with Coinbase hired as the custodian for 8 of the 11 Bitcoin ETFs approved by the SEC in addition to its surveillance sharing agreements,” he stated. “We think the approval of the Bitcoin ETFs are potentially a lose/lose situation for Coinbase as we see a Bitcoin ETF, if particularly successful, as a competitor to Coinbase.”

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