Following the pro-XRP decision in the SEC’s action against Ripple, Coinbase, one of the top cryptocurrency exchanges in the world, saw a sharp increase in the price of its shares. But what specifically drove Coinbase’s unexpected increase, and why did it quickly give up these gains?
The SEC’s lawsuit against Ripple Labs served as the impetus for this breakthrough. Federal securities regulations were broken, according to the regulatory authority, because XRP was sold as an unregistered security. Given that the designation of digital assets as securities would necessitate them adhering to a separate and more strict set of rules, this case has wider repercussions for the whole cryptocurrency sector.
The favourable decision in favour of Ripple was interpreted as a sign of regulatory tolerance for other cryptocurrency firms, including Coinbase. The community believed that it would create a precedent if XRP, after years of operation and extensive usage, was not classified as a security. This may protect other digital assets and their token sales from the same governmental oversight.
As a result, the pro-Ripple decision indirectly increased Coinbase’s value while providing reassurance to other cryptocurrency firms concerned about governmental crackdowns. It was believed that if the SEC was unable to prove that XRP constituted a security, other organisations, such as Coinbase, could have a stronger defence against any allegations of the same type.
The joy, though, didn’t last long. Despite the initial boost, the price of Coinbase’s shares quickly started to decline. Although there was some brief excitement following the Ripple decision, there are still some general worries regarding the regulatory framework for cryptocurrency businesses. Investors are aware that every situation is unique and that Ripple’s success does not always translate to success for other crypto companies.
