SAN ANSELMO, CALIFORNIA - JUNE 6: In this photo illustration, the Coinbase logo is seen on a screen on June 6, 2023 in San Anselmo, California. The Securities and Exchange Commission has filed a lawsuit against cryptocurrency exchange Coinbase for allegedly violating securities laws by acting as an exchange, broker, and clearing agency without registering with the Securities and Exchange Commission. (Photo Illustration by Justin Sullivan/Getty Images)
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Shares of Coinbase and Robinhood rose on Thursday as traders bet that the approval of bitcoin exchange-traded funds in the US would give cryptocurrency trading platforms a boost in demand.
Coinbase and Robin Hood Both rose 3.7% in pre-market trading.
On Wednesday, the Securities and Exchange Commission approved rule changes allowing bitcoin ETFs to launch in the US. Investors in the crypto space have long awaited the news as it is seen as lending more credibility to what has been a volatile industry and asset class.
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โThis is a monumental step for the crypto industry,โ Coinbase CEO Brian Armstrong told CNBC's Andrew Ross Sorkin in an interview broadcast Thursday. "There are 52 million Americans who have been using cryptocurrencies for the last decade, and I think they have been waiting for some kind of recognition from the government, and the SEC in particular, that this asset class is here to stay, and finally I have it."
There is some concern that the arrival of a spot bitcoin ETF in the US. could put pressure on Coinbase in the future โ as it offers investors an easier way to invest in cryptocurrencies. But investors seem to be betting that interest in the crypto industry as a whole will increase.
To be sure, Coinbase is custodian of several of the ETFs that are scheduled to begin trading soon, meaning the company will incur fees for that service.
"We view the impact of a Bitcoin ETF as having both positive and risk elements for Coinbase, but given Coinbase's share price appreciation, we view the risks as more relevant to shareholders," JPMorgan analyst Kenneth Worthington wrote. .
โOn the positive side, we see Coinbase as the custodian of choice for Bitcoin ETFs, with Coinbase contracted as a custodian for 8 of the 11 SEC-approved Bitcoin ETFs, in addition to their co-watch agreements,โ he said. โWe believe the approval of Bitcoin ETFs is potentially a lose/lose situation for Coinbase, as we view a Bitcoin ETF, if particularly successful, as a competitor to Coinbase.โ
Coinbase is coming off a monster year, with a 391.4% rally in 2023. Robinhood also soared more than 56% last year.
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