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Be Wary of $COIN Stock Surge and Bitcoin Price Rise from XRP Victory: Berenberg

Published July 14, 2023 4:43 PM
Omar Elorfaly
Published July 14, 2023 4:43 PM

Key Takeaways

  • XRP case signals a potential false prophecy for Coinbase
  • Analysts say COIN facilitates “secondary-market transactions on its exchange”
  • German Bank Berenberg says “XRP can in fact represent a securities transaction”

COIN, Coinbase’s stock has been having an upward-trending rally over the week. On Thursday, shares saw yet another surge in valuation following the news of a win of an adjacent crypto exchange.

Bernberg, a German investment bank says that investors should pay attention to the factors that led to COIN’s surge, claiming it might be a mirage. 

A Wave Of Optimism

Earlier this week, Coinbase found itself married to the potential future of the crypto market. The biggest US-based exchange was named “surveillance partner” on several ETF applications filed by some of the world’s biggest financial institutions, including BlackRock, Fidelity, and Valkyrie. 

The second the news broke out on the Coinbase-Wall Street collaboration, the exchange’s stock (COIN) surged to over $90, which led key investors and company executives to offload a significant chunk of stock onto the market for profit.

Then, on Thursday, a lawsuit that has brewed for nearly two has finally come to an end. In 2021, the SEC filed a lawsuit against Ripple, another US-based exchange, for allegedly selling unregistered securities. The focal point of the case was XRP, Ripple’s native token.

U.S. District Judge Analisa Torres declared that Ripple did not violate federal securities law by selling its XRP token on public exchanges.

Stakeholders in the crypto market saw Ripple’s win as a triumph for the entire industry. Coinbase, who is also facing SEC litigation was seen  celebrating Ripple’s, calling it “W for 

@ripple. W for the industry. W for the builders. W for a clear rulebook. W for updating the system.”

As a side-effect, optimism rose for Coinbase as the market sees Ripple’s victory as a sign that Coinbase is more likely to dismiss its own SEC troubles. However, Berenberg, A German investment bank, that has a hold rating on Coinbase shares and a price target of $39, says  investors should be careful of false optimism. 

Coinbase’s Case Is Not The Same As Ripple’s

Berenberg analysts led by Mark Palmer wrote that “The surge was driven in large part by investors who interpreted Judge Torres’ ruling as representing a rejection of the SEC’s argument in the lawsuit it filed against COIN on June 6 that many of the tokens bought and sold in secondary-market transactions on the company’s exchange are unregistered securities.”

However, Palmer and co noted that investors should take a closer look at Judge Torres’ ruling, as it “pertained solely to the primary market transactions through which Ripple sold XRP, while COIN is in the business of facilitating secondary-market transactions on its exchange.”

Berenberg also hits investors with a reality check as it points out that the judge’s decision is “immaterial in the context of COIN since she also acknowledges that the sale of XRP can in fact represent a securities transaction.”

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