Hack? SEC Probe? Coinbase Stock Soars Despite Difficult Week

Coinbase stock price had its best week since November last year, even as the company moved from one bad news to another. 

Coinbase shares ended the week at $266, their highest level since February and 88% above their lowest level this year. This gives Coinbase a market cap of over $67.8 billion. 

Coinbase experienced major headwinds

This rally happened in a difficult week for the company and the crypto market. First, the recent crypto market rally stalled, with Bitcoin (BTC) remaining stubbornly below $105,000 and many altcoins crashing by double digits from their monthly highs.

Second, Coinbase revealed a major hack that may cost it over $400 million. The hackers collaborated with overseas staff, received sensitive data, and demanded a $20 million ransom. Coinbase revealed that it will not pay the ransom but instead will pay for tips leading to the hacker’s arrests. 

Third, it was revealed that Coinbase was under an SEC probe for misstating customer data in its disclosures. The probe centers on whether the company has over 100 million verified users, as it claimed in filings. Coinbase has insisted that it stopped reporting that number two years ago.

Why Coinbase stock price soared

Coinbase stock price rose despite these headwinds because these events will not have a major impact on its business. First, the ongoing pullback in the crypto market will likely be temporary, with most analysts predicting more Bitcoin gains in the long term. Ark Invest expects BTC to hit $2.4 million in 2030, while BlackRock has a $700,000 target.

Second, historically, the impact of a hack to a company’s performance is usually limited. For example, Equifax’s stock price has jumped since 2017 when it was hacked and data on 147 million customers was stolen. Other companies that have thrived after their hacks were Target, Home Depot, Sony, and Capital One. 

Also, there is a probability that Coinbase has insurance coverage that will help with any related payments. 

Third, the ongoing SEC probe started under the Biden administration, meaning that the Paul Atkins-led agency may decide to end it. The SEC has already ended many previous probes started by Gary Gensler.

Further, this week’s events did not lead to a downgrade by Wall Street analysts. Some of the most bullish ones are from Benchmark, Rosenblatt, Oppenheimer, and Compass Point. 

These analysts cite its strong market share in the U.S. and its expansion to the derivatives market through the Deribit acquisition. 

Most importantly, the Coinbase stock price jumped ahead of its addition to the S&P 500 Index on Monday. This addition means that all funds that track the index will be forced to buy the stock.