I have a feeling they’ll fight it in court, not because they believe they’d win but because they’d prefer to delay the outcome while preparing for the downside

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The anti-crypto bias is getting stronger and stronger in these articles, making them less and less interesting. Try not to pick a side! The people who hate crypto are just as full of shit as the people who are overly zealous about it. Time will tell.

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Mar 24·edited Mar 24

Strongly disagree with this take. Your analysis has a number of errors.

1. The antagonism is coming from regulators themselves who are embarrassed that they were duped by SBF and are now overreacting against financial innovation. The SEC currently has no pathway to registration for crypto, and is engaged in massive gaslighting of a trillion dollar asset class. See Armstrong's thread detailing how Coinbase met with the SEC 30(!) times to try and proactively achieve registered status - instead of engaging in a helpful way, the SEC is falling back on its usual incompetent playbook of regulating by punishment: https://twitter.com/brian_armstrong/status/1638654192138199041


2. Your analysis has no understanding of crypto market cycles. Crypto is a heavily cyclical industry, and its revenues should be analyzed in that context - when the next bull market comes, revenues will rebound substantially. Coinbase has laid off numerous employees, and will undoubtedly lay off more if necessary in order to maintain a healthy cash buffer. Brian Armstrong is a midwit, but he's smart enough to fire everyone except a few devops engineers if needed to keep the lights on.

3. Coinbase has a great shot at winning in the courts, especially if its cases go to the Supreme Court. The Supreme Court is full of conservatives who are skeptical about the kind of regulator overreach that the SEC is doing (e.g., https://www.reuters.com/legal/government/will-us-supreme-court-epa-ruling-rein-federal-regulators-2022-06-30/).

4. Coinbase's staking most definitely does not constitute an investment contract. It is a service which operates validators on behalf of the end user and passes through staking rewards to that end user. If you own a piece of real estate and hire a management company to collect rent for you, is that an 'investment contract?' It's not. Staking has the exact same dynamic.

5. Coinbase is launching new product initiatives like BASE, which will be a rollup chain that partners with Optimism. Given your analysis I assume you don't understand what those words mean, so I'll just put it this way: if they get this right, the revenue opportunity is massive, as they'll be able to onboard tens of millions of users onto a platform that could generate substantial fees. Arbitrum, another rollup, just launched today and currently has a market cap of $14 billion.

A bearish position could still be correct in light of all this, but your analysis as it stands is heavily misguided. I personally believe that the risk of shorting a high duration, high potential company like COIN is quite high and wish you luck in not getting margin called.

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While I may be the nail sticking up that gets hammered down, I don't think the SEC has acted entirely fairly these last couple of years. They've dithered, not given a clear idea of how they define a security and then sued firms who didn't comply with their arbitrary regulations that were never abundantly clear in the first place.

And look, tons of scams in crypto! Absolutely. Loads of grift, loads of projects that deserve to be shut down, but the SEC has not been particularly fair to the crypto companies who actually want to do right. And whatever Gensler might say, I don't think using the Howie test from 1933 is really a great idea for crypto. Is that really the best we can do? Did we apply the same regulation to steamboats as nuclear submarines?

I liked this article, broadly agree with it, but I think it paints the SEC a bit too favorably when in my mind they've behaved more like goons in three piece suits than sophisticated and conscientious purveyors of public safety and financial regulation.

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Great write up.

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It's Letitia James, not Letitia Jones.

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To have a risk of bankruptcy don’t you have to have un-repayble debt? So what information do you have that this is the case?

There is a difference between, “poor” or “overvalued” and bankrupt.

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The entire thing is such a joke.

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New Fraudsters: Same as the Old Fraudsters.

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