Coinbase Global, Inc. (NASDAQ:COIN) shares have dropped by approximately 5%

The drop in the overall crypto market cap has impacted Coinbase's average daily volumes by 27.56% compared to the previous quarter

Coinbase (NASDAQ:COIN) shares have dropped by approximately 5% since I last wrote on them in late June as Bitcoin is roughly flat, but the prices of altcoins have suffered from sharp declines. The drop in the overall crypto market cap has impacted Coinbase's average daily volumes by 27.56% compared to the previous quarter after they reported a decline in user engagement and trading activity on the platform.

In Q2, the exchange's market share slid to 41.2% from 44.6% in Q1 after heightened competition (from companies like Robinhood (HOOD) which I also happen to be bullish on) and thus user migration to other platforms.

The crypto market's recent bearish tilt is a function of Vice President Kamala Harris' strong showing in polls showing she has a real chance of becoming president (much higher than Biden did a month ago). Critics fear she will adopt policies that are even less favorable to the cryptocurrency sector than the Biden administration.

What's notable about this is that she has been far less outspoken on the issue compared to her opponent, Donald Trump, who has been a vocal supporter of the crypto industry.

I think that the concerns about Harris' potential presidency devastating to the cryptocurrency market appear overblown. In the past, the U.S. stock market has demonstrated growth across both Democratic and Republican administrations. The cryptocurrency market has done the same. And I expect that going forward, the cryptocurrency market will likely exhibit a similar trend.

Under President Biden (specifically SEC Chairman Gary Gensler), the market has definitely been affected by the increasing regulatory scrutiny, but that doesn't mean it has collapsed. Similarly, I think this means that a Harris administration would not be the grenade into the crypto machine like many fear it would. The U.S. financial system (and I think the Defi market as well with most coins being decentralized) tends to find an equilibrium regardless of the political chaos, as the investors who participate in crypto are now spread across different income levels and global markets. It's really one of the most global financial markets we have. Do we really think one country's leader is going to stop all that?

On top of this, I think Congress is actually moving in the opposite direction, with legislation on the docket to help safeguard crypto as a legitimate asset class. I believe these legislative developments will further help provide favorable legal frameworks to the world of crypto.

In essence, I think all of this political bearishness is overblown. I'm still bullish on Coinbase. I believe they will benefit from the still strong (and YoY growing) investor confidence in crypto that will outlast short-term political concerns.

I believe a lot of the crypto market's reaction has been influenced by political developments with the odds of Trump winning the presidential election now lower. The sudden shift in political expectations after President Joe Biden's decision to back out has raised a lot of concern among crypto investors. They fear that without Trump's support for less crypto regulation, Harris might likely impose stricter regulations that curb the rapid expansion of the market.

With this (and the betting odds) I think a lot of this perceived risk is now overpriced in the market.

Despite these concerns, I really think the long-term fundamentals remain strong. There's increasing institutional adoption through Bitcoin and Ethereum ETFs plus broader acceptance of cryptocurrencies as more legitimate investment vehicles. I'm doing follow-up coverage to show the market is too bearish and too irrational here about the political effects on crypto. When the market is irrational and when the market is too bearish, that's when I think investors have the best chance to make a strong return.