Answering Reader Questions About the SEC Lawsuits and What It Means For Your Money

After last week's article discussing the SEC lawsuits against Binance and Coinbase, we received a lot of questions from you, our dear readers.

Understandably, many of you are concerned about what this means for our beloved digital money. Whether it was hacks, blowups, or a natural boom and bust cycle, the crypto industry has weathered many-a-storm.

But now, with the regulators at the SEC coming down on exchanges, and thought-leaders claiming that the US government will do anything they can to “destroy crypto” to save fiat, you are probably asking yourself what to do.

So, in this issue, we’re answering some of the most common questions we received over the last week.

What does the SEC lawsuit mean for BTC?

It’s definitely not great, but it’s not the end of the world either.

The regulatory crackdown has created stress in the industry with market-making giants, professional investors, and retail investors beginning to pull away from crypto.

But while it has impacted some other tokens, BTC’s price hasn’t moved all that much throughout this entire crackdown. What price movement there was, looked to be mostly due to selling pressure from crypto moving off of Binance.

Remember, BTC is a global asset and it behooves the US government to support it, get left behind, or as Peter Thiel has put it, be dethroned.

Bitcoin’s entire value proposition rests on being decentralized, permissionless, and censorship-resistant. The SEC targeting crypto will have an impact on bitcoin’s price without a doubt, but in the long run it will be fine.

What does this mean for Coinbase and other Western exchanges as a user?

In the short run, not much. Coinbase has already said they will continue to operate their exchange as usual, and will continue to do so until the case is resolved one way or the other.

In the long run, potentially a lot. If the SEC wins, it means the legal system determined that Coinbase is an unregistered securities exchange. That’s when all hell would break loose. Does Coinbase pay a fine? Get shut down? Is crypto legal in the US? At that point, it’s anybody’s guess.

But, there are a lot of steps and most likely many years before we get to that point. Ripple’s SEC lawsuit began in 2020, for example, and they are still litigating it today. So, there’s not much reason to get too worked up about this right now.

Furthermore, user assets on Coinbase are fully backed and exchanges such as Kraken publish a proof of reserves.

While we do believe assets on these exchanges are safe, it still may make sense to self custody your assets.

What does this mean for Coinbase’s stock price?

Coinbase’s (COIN) stock already took a big hit after the lawsuit announcement, but other than that, the likely answer is the same as above: not much.

At this point, there’s most likely nothing in the case that will move the stock much in either direction, and everybody who was going to sell because of the lawsuit has probably already sold. So, in relation to COIN’s stock price, the case probably won’t affect volatility much further until we know what the end result will be.

Taking it a step further though, we have to work under the assumption that Coinbase may settle or even lose against the SEC. If that is to be the case, Coinbase will have to pay a large fine. But you have to ask yourself, what is the fine worth with the potential of finally getting regulatory clarity?

One could argue that having regulatory clarity around what the exchange can and cannot do is worth more than any hundreds of millions of dollars in potential fines, in which case the stock may even rise.

As for other exchanges that were looking to go public soon including Kraken and Blockchain, that’s not going to happen.

What does this mean for ETH and other crypto assets?

We’re going to sound like a broken record here, but for assets that weren’t called out by the SEC as securities, not much until the case is decided.

In reality, this might be a good opportunity to scoop up tokens that you like on the cheap.

But, for the assets that were called out by the SEC as securities, we would probably steer clear for now.

So, what should I do?

Don’t panic and ask yourself why you are here in the first place.

If you are participating in the crypto economy to gamble on small assets hoping they 100x tomorrow, then the SEC lawsuits might be reason for concern and we suggest checking out the latest AI hype plays.

But if you are in this economy to take back control from corruption, to hedge against government overreach and overspending, and to support the new and emerging decentralized economy, then now is the time to stay strong and vote with your wallet.