Cathie Wood’s ARK Invest has once again increased its stake in the cryptocurrency exchange Coinbase, despite recent market turbulence.
The investment firm recently purchased a total of 168,869 Coinbase shares, valued at around $8.5 million, for its various exchange-traded funds (ETFs).
This follows ARK’s acquisition of 304,300 shares in April and a whopping 2.4 million shares in March, demonstrating the company’s continued confidence in the crypto exchange.
Coinbase’s stock struggles amid SEC action
The latest acquisition comes at a time when Coinbase’s stock is facing another downturn. Shares dropped 6.8% amid news of a class-action lawsuit alleging that the exchange violated privacy laws.
Over the past month, the company’s shares have declined by more than 20%. This downturn can be partly attributed to ongoing action against Coinbase by the United States Securities and Exchange Commission (SEC), which issued a Wells notice in March, suggesting enforcement action against the exchange.
In response, Coinbase filed a motion against the SEC, asking the regulator to answer 50 questions related to the regulatory treatment of certain digital assets.
ARK Invest’s bold bets amid market drawdowns
Despite facing significant headwinds in 2022 due to unexpected market drawdowns and substantial exposure to volatile tech stocks and digital assets, Cathie Wood remains confident in her long-term investment strategy.
In December, ARK Invest bought around $12 million in Tesla stock, signaling renewed confidence in the automaker’s future performance. Additionally, in November, the firm purchased 176,945 shares of Grayscale Bitcoin Trust, valued at $1.5 million.
Cathie Wood’s ARK Invest is likely to continue investing in stocks that she predicts will see long-term growth, such as Tesla.
In January 2023, the company acquired an additional 389,305 Tesla shares, worth $47 million, after Tesla reduced the prices of its Model Y and Model 3 cars.
The automaker had struggled with low demand for its vehicles in 2022 amid news of a global recession and inflation, but the price reduction brought renewed hope for sales recovery.
The firm’s flagship fund, ARK Innovation ETF (ARKK), focuses on “disruptive innovation” and experienced a significant surge in 2020, handily beating the Nasdaq’s hefty 43.6% return.
However, the ARKK ETF sharply underperformed the Nasdaq in 2021, finishing down 24% compared to the Nasdaq’s 21.4% advance. That underperformance continued in 2022, with the ARKK ETF plunging 67% vs. the Nasdaq’s 33.1% annual loss. Despite these setbacks, the ARKK ETF has rebounded in 2023, up 23.5% through April 6.
Coinbase’s since IPO
Coinbase made its debut on April 14, 2021, with shares priced at $250. However, the stock has since faced significant losses, trading more than 60% off its 52-week high. As a result, Coinbase offers another avenue for ARK Invest to gain exposure to cryptocurrencies.
With the ARKK ETF about 34% off its 52-week high, it’s not considered a buy right now. Investors should wait for the ETF to halt its current downtrend, form a new base, and then break out past a correct buy point to indicate the proper time to buy. As of now, the ARKK ETF has dropped more than 2%.
It remains to be seen whether ARK Invest’s bold bets will pay off in the long run. However, with Wood at the helm, the investment firm continues to make calculated moves in disruptive sectors, despite market fluctuations and setbacks.
