How the crypto market is reacting to SEC's Coinbase lawsuit

Bitcoin is trading lower after the Securities and Exchange Commission sued both Binance and Coinbase. Yahoo Finance market reporter Jared Blikre breaks down the market reaction.

Video transcript

RACHELLE AKUFFO: Well, AI hype has driven tech stocks higher so far this year with NVIDIA, of course, leading the way up over 100% year to date, and Citi analysts say this boom could continue. Here to break this down for us, our very own Jared Blikre. So Jared, before we get to tech, let us know what's happening in the crypto market, of course, following all of the news this morning.

JARED BLIKRE: I'm glad you asked because I do have our crypto heat-map up here. Coinbase got served. And you can see Bitcoin down about 3%. The SEC going after them saying that they were selling unregistered securities, I believe, acting as an unregistered broker dealer. This comes only a day after a very similar suit filed against CZ and Binance-- at least Binance US here.

Here is a chart of the year to date of Bitcoin, and we can see a little bit of a downdraft here yesterday. But I think what stands out here-- we're still in the upper about one third of its trading range for the year. This is still an intermediate trend-- intermediate uptrend that we're looking at. But now with these series of lower highs and lower lows, we are now in a short-term downtrend. So $25,000 or roughly speaking is a big approximate level that we're looking at there.

What's the fallout in crypto from this? I think, you know, Coinbase has said that if the SEC had its way regulating everything the way they said they were going to in theory, it'd be very difficult for them to be in business. So this is a life or death struggle here. The SEC has gone to war against crypto. I think a lot of the bad news is already out.

But I will say, if Binance were to fall in some way, shape, or form, that's probably just too big for the market to absorb, and I would expect that to be a big liquidity taking away event. That's about all I have on the crypto front right here. I'll just take a quick look at some of the crypto stocks. Coinbase itself, not surprisingly, down about 13.6%, Rachelle.

RACHELLE AKUFFO: And some of this bullishness on Citi that we talked about here what are you watching there?

JARED BLIKRE: Well, I'll tell you what, you mentioned that Citi note. Their big theme is really concentration risk, and that's something that we've been talking a lot about. Here is what's going on in the market today. We have the NASDAQ up 28 basis points. Not a lot. Dow up about half of that. But really the story has been the mega caps this year, and the concentration risk is real. Whether you consider the top seven or top eight in the NASDAQ 100 the magnificent seven or the something eight, these guys are really driving all the action here.

You take a look at what's happened over the last month. Some incredible statistics here. But the big question on everybody's mind is, can this continue, and for how long? We've seen concentration risk survive for over a year, maybe a year and a half in 1999 to 2000 and the tech bubble. These things can be irrational, but they can also be irrational for longer than you and I can stay solvent. Important to remember. So these things have momentum. Sometimes they just feed on themselves.

I'm going to do a quick technical analysis on Apple because I think it's still relevant to what we're dealing with right here. Apple is overextended, and it just barely managed to poke above its all-time high yesterday and pulled back down. Apple is a bellwether stock. This tells me maybe it wants to pause. But on the flip side, if it just gets going again, if it just takes off, guess what? These other guys, these other mega caps, probably going to go along with them. [? So ?] the NASDAQ. And there's your pain trade up.

RACHELLE AKUFFO: Well, there you have it. Jared Blikre there with that great break down there for us. Thank you so much.