Both stock and cryptocurrency investors have cause to notice one downturn in the stock market today as shares of Coinbase Global (NASDAQ:COIN) began the week by plunging. Multiple news stories have broken recently that serve to highlight the reason for the crypto exchange’s turbulent start to the trading week.
What’s Happening With COIN Stock
Coinbase experienced some violability last week but today marked a much worse beginning as shares of COIN stock plunged by more than 4% from the previous week’s close. As of this writing, shares are down by 5.4%.
This isn’t surprising given the recent announcements from the company. News broke yesterday that Coinbase had signed a contract with the U.S. Department of Homeland Security, specifically the Immigration and Customs Enforcement (ICE) department, to provide use of its analytics platform for the study of the knowledge of American residents. The initial agreement nets Coinbase $1.36 million, but it could increase if the partnership continues.
Another announcement came this weekend, revealing that Coinbase was abandoning its plan to launch a USD Coin (CCC:USDC-USD) lending program, designed to operate under an interest-yielding model. For the crypto enthusiasts who had been keenly watching this initiative, this was unwelcome news.
Both decisions, though, were quick to garner negative attention from crypto communities, quickly causing the stock to plunge and leaving analysts to ponder what this meant for the future of both the company and of cryptocurrency markets.
Two Big Reasons Why This Matters
Cryptocurrency has always attracted investors who appreciated the outlaw business model of a decentralized currency system that operated outside the bounds of Wall Street regulation. For the country’s premier crypto exchange to bow to this type of regulatory pressure from a government institution, particularly one as controversial as ICE, sends a clear message that the company has sold out to the exact people that crypto was created to work against.
Internet forums are ablaze with chatter about Coinbase’s actions and the verdict is clear — crypto investors are not happy and they have no desire to invest in a company that is working with ICE. The decision not to launch its lending platform just happened to come at an especially bad time.
Coinbase users are taking action and investors who hold COIN stock are paying the price.
COIN Stock, Coinbase, and Crypto – What’s Next?
Coinbase’s current situation creates an interesting paradox, one that the cryptocurrency world was always going to eventually have to face.
Regulation was always going to find its way to companies like Coinbase. While it’s not hard to see why the outlaw business model that accompanies crypto investing was enticing, particularly for the anti-Wall Street crowd, it was also one that would inevitably have to deal with regulatory pressures. To assume that someone could rise to the levels that major cryptos, such as Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) have and never attract any serious government attention is classic wishful thinking.
The fact that a company like Coinbase was necessary should have served as an indicator to crypto investors that regulation was not far off. Coinbase is clearly trying to make nice with its government by partnering with the Department of Homeland Security, deeming the fact that it would anger its userbase a worthwhile price to pay.
It is worth continuing to watch Coinbase here, but COIN stock investors should proceed with caution.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
