Source: Seeking Alpha, figures in millions of U.S. The assets held for customers are likely much lower than they were at the end of Q3 but according to the last filing those were liabilities that were over-collateralized. We have to caveat these metrics because they are the latest numbers we have and they pre-date the FTX collapse. I can't get there on Coinbase because the balance sheet doesn't yet reflect a company knocking on death's door. In my experience, short interest ratios this high are generally for dying retail chains and companies that are clearly going bankrupt. There is serious squeeze potential in this name right now in my view. Not only that, but the borrow rate has been extremely elevated as well. COIN's shares available to short haven't touched pre-LUNA ( LUNC-USD) collapse highs. Looking at the iBorrowDesk data shows a stock that is very expensive to borrow currently with not many shares available left to sell:Īnd this has actually been the case for a long time. But I have to wonder if the trade has become too one-sided at this point. Short sellers have done incredibly well with Coinbase since $400 - it's truly been a remarkable trade. According to the last short interest report, COIN has 38.5 million shares short - essentially 17% of the shares outstanding and 21% of the float. The level of shorting that has taken place in Coinbase has been substantial. However, predicting what Washington will do is difficult and not the main reason why COIN looks interesting today. Since there are numerous regulatory concerns about Binance ( BNB-USD), I think the biggest beneficiary of more crypto-centric regulation would ultimately be Coinbase. But if it does pass, it's probably good news for centralized exchanges. To be clear, I'm not saying the Digital Asset Anti-Money Laundering Act is likely to pass or that it should pass. Many of them are built with open-source software and are maintained by volunteers. It is highly unlikely that any or most of these applications would be able to do such a thing. From where I sit, this would mean that self-custody applications like Trust Wallet ( TWT-USD) would have to start collecting and reporting user data with the federal government. KYC rules for wallet providers would essentially make any self-custodial wallet application that doesn't collect personal identification information like physical addresses and driver's license data not compliant with the law. If it becomes law, the Digital Asset Anti-Money Laundering Act will bring know-your-customer (KYC) rules to crypto participants such as wallet providers and miners

It is interesting that after the failure of a centralized crypto custodian marketed as the 'trusted' exchange, rather than guidelines for greater proof of reserves transparency from custodians, the push from some in the government has instead been to make it more onerous for self-custody wallets to do business. Ultimately tax revenue is what matters and that is what is likely the real motivation behind the recently proposed Digital Asset Anti-Money Laundering Act.

The alternative is all crypto trading activity moves on-chain where, despite the transparent nature of a public ledger, it will likely be harder for the IRS to associate gains directly with Social Security numbers. Companies like Coinbase may ultimately survive crypto winter if it is in the interest of the US federal government that they do. Look no further than the recent FTX disaster ( FTT-USD ) or any financial fraud throughout history. Crypto can very easily be criminalized but laws don't ultimately stop people from becoming criminals when they want to break the rules. government ban the use of crypto? The answer I have come to for years is probably not in a way that is actually enforceable. Let's start with a simple question can the U.S. With so many obvious scam crypto coins and currencies, the rational question is what kind of regulatory wrath awaits this industry? Regulatory Game Theory This time though it's seemingly investors in the very business of crypto who need to be brave as buying COIN today would be buying shares of a company that looks like a sinking ship. We know how the Bonk story will likely end. Now it's all about Bonk ( BONK-USD ), the new dog money that everyone seems excited about.

Though at that time it was consumers who were 'brave' when plowing fiat into Shiba Inu ( SHIB-USD ) and other dog-themed joke coins. is not Coinbase ( NASDAQ: COIN) but the sentiment still applies. That quote is actually from Matt Damon from his widely-despised ( CRO) commercial from late 2021.

Fortune favors the brave