Cathie Wood’s Ark Keeps Buying Coinbase Stock – Is She Being Clever or Stupid?

Cathie Wood, CEO of investment management firm ARK Invest, has acquired more shares of major cryptocurrency exchange Coinbase which has lost almost 90% of its value over the past year. 

The company purchased approximately $5.8 million worth of COIN stock on Thursday, split between the ARK Next Generation Internet (ARKW) and ARK Fintech Innovation ETF (ARKF) ETFs, with the former adding 27,813 COIN shares and the later 144,463 shares.

Wood’s investment management firm ARK has been aggressively accumulating Coinbase shares. Over the past month alone, she has snatched about 800,000 Coinbase shares, valued at around $27 million as of the January 5 close. All the buying has made Coinbase the #14 holding in Wood’s flagship Ark Innovation ETF ARKK.

ARKF, launched in 2019, plans to invest in equity securities of companies that ARK believes are transforming financial services and economic transactions to technology infrastructure platforms. Square, Shopify, and PayPal are the top three holdings of the fund.

Coinbase is the largest U.S. cryptocurrency exchange. The platform went public back in 2021 but has since suffered from weakness in the crypto market. Coinbase stock has dived 86% in 2022. 

Meanwhile, Wood is seemingly less bullish on Silvergate, a crypto-focused bank, as she has unloaded more than 400,000 of the company’s shares, a value of about $5 million based on the day’s closing price. This leaves the fund with only 3,434 Silvergate shares, recently valued at just $37,465. 

As reported, Silvergate has cut staff by 40% amid a 68% decline in its crypto-related deposits in the fourth quarter of last year. In the wake of FTX’s bankruptcy, the company suffered a bank run that forced the company to sell assets at a significant loss in order to honor $8.1 billion worth of customer withdrawals.

Wood’s funds haven’t done quite well over the past two years amid high inflation and weak earnings. For instance, Cathie Wood‘s ARK Innovation ARKK, lost more than 60% of its value in 2022, which has led to many investors pulling their money out of the funds. 

However, Wood continues to remain bullish on her investments, claiming that they have a high potential for growth over the long run. In a recent tweet, she said:

“The financial world criticizes and denigrates ARK Invest’s research and investment focus on exponential growth: it dismisses our forecasts of the massive latent profitability in companies sacrificing short-term profitability for exponential and highly profitable long-term growth.”

It is worth noting that Coinbase couldn’t benefit from the fall of rival platform FTX last year. In contrast, Binance, the world’s largest cryptocurrency exchange, ended 2022 with a 66.7% market share compared to 48.7% at the start of the year.