What happened

For the week, shares of the large crypto exchange Coinbase (COIN -5.46%) traded roughly 12% lower after market close Thursday after dealing with regulatory issues that drove bearish sentiment.

So what

Earlier this week, it came to light that Coinbase is being investigated by the Securities and Exchange Commission (SEC) for allegedly allowing users on the platform to trade cryptocurrencies that are not yet registered with the SEC.

There has long been debate over whether cryptocurrencies should be classified as securities and therefore regulated by the SEC. Some think cryptocurrencies should be regulated like other currencies, which are treated as commodities and therefore overseen by the Commodity Futures Trading Commission.

"I'm happy to say it again and again: We are confident that our rigorous diligence process -- a process the SEC has already reviewed -- keeps securities off our platform," Paul Grewal, Coinbase's chief legal officer, wrote on Twitter.

Following the news of the SEC investigation, longtime Coinbase bull Cathie Wood and several exchange-traded funds in her firm ARK Invest sold roughly 1.4 million shares of Coinbase.

Now what

It has been a brutal year for Coinbase, with shares down more than 75% this year and nearly 82% since going public. Obviously, the crypto winter, which has included a broader crypto sell-off and lower crypto trading volume, has not been good for the company, which has also seen its trading fees compress.

I have previously been bullish on the stock and am certainly a little worried at this point. However, I do think this is a stock that can bounce back when crypto does, which may still take some time. The firm does need to continue to diversify its revenue.

But if you believe that cryptocurrencies are here for the long haul and that more people will trade them in 10 years than now, I do think Coinbase will have a role to play. I'd rate the stock as a hold right now.