It’s been a week. On Monday, the SEC sued Binance, saying the crypto exchange had shown “blatant disregard of the federal securities laws.” And on Tuesday, the SEC sued Coinbase for acting “as an exchange, a broker, and a clearing agency, without registering as an exchange, broker, or clearing agency” and selling “without registering its offers and sales.”
The SEC took 101 pages to detail its charges against Coinbase. And it took 136 pages to explain the charges against Binance. I’m still sorting through filings. And I will write about them extensively for Early Investing members on Friday.
But some things can’t wait. In its lawsuits, the SEC named several coins as unregistered securities. It also suggested many other unnamed coins were also unregistered securities (the lack of detail is stunning for an agency meant to protect investors).
All of this will get sorted out in litigation. And if I’m Coinbase, I’m taking this (or trying to take this) to the Supreme Court.
I also believe this isn’t the endgame for crypto, but a new phase in crypto’s development. I’ll share much more about that on Friday.
But for now, it’s time to take some risk off the table and sell some of the coins identified as unregistered securities in the SEC lawsuit.
Let’s start with easy decisions. You should sell Solana (SOL), Near Protocol (NEAR), Binance Coin (BNB), and Filecoin (FIL) right away. Selling Filecoin definitely hurts. It’s a solid project. I’m not entirely sure why Filecoin is in the SEC’s crosshairs. But it’s the smart play here.
Now we get to the tougher decisions — Polygon (MATIC) and Cosmos (ATOM).
I think the smart play is to sell Polygon. We’re up almost 30%, so let’s lock those profits in. But let’s hold on to Cosmos for now. I think we should wait to see how this litigation plays out before selling any of these coins. It’s likely going to take months, if not years. Cosmos is down about 12% since Monday, so it’s showing some resiliency. Plus, it’s the more decentralized of the two coins — which will help from a legal standpoint — and is the project with the most long-term potential.
Finally, let’s go ahead and sell our position on Avalanche (AVAX). I actually believe that Avalanche has bottomed out. But I also think there are better places to deploy our capital.
There’s a chance that major American exchanges will delist some of the coins named by the SEC while they wait for litigation to play out. If that happens, then it will make sense to sell Cosmos. But until then, let’s hold on to Cosmos and see what happens.