ARK Invest, led by Cathie Wood, has taken a risky move in the world of crypto-equity by purchasing nearly 40 million dollars worth of cryptocurrency-related stock in the broader market that is reeling from a slump. CoinDesk+2GuruFocus+2
the purchase
The previous Wednesday ARK revealed significant deals in the flagship Exchange Traded Funds (ETFs):
About 463,598 shares of Bullish (ticker Bullish (ticker:) worth around US$16.9 millions. CoinDesk+1
About 219,019 shares of Circle Internet Group (ticker: CRCL) — totalling approximately US$15.1 millions. CoinDesk
Around 265,651 shares of BitMine Immersion Technologies (ticker: BMNR) -estimated at US$7.6 millions. CoinDesk
The moves are happening as the overall crypto-equity market is in a state of flux: Bullish shares fell around 3.6 per cent during the day, whereas Circle and BitMine each fell around 9.9%. CoinDesk+1
what is the significance of it
ARK appears to be engaging in classic “buy the dip” behaviour–capitalising on market weakness to expand positions in firms related to crypto infrastructure and fintech. In a space that is heavily filled with uncertainty and doubt the ARK move is a strong signal of conviction. GuruFocus+1
For Bullish, which operates as an exchange for cryptos that is backed by big names such as Peter Thiel. investment confirms ARK’s faith in its future potential. Circle however is a major player within the stablecoin (USDC) ecosystem and BitMine plays a prominent role in the cryptocurrency-asset mining and accumulation. Through a greater exposure to the companies mentioned above, ARK has been aligned with the longstanding theme of disruption blockchain, digital finance. CoinDesk+1
the dangers and the context
It is a risk to be cautious the crypto-equities market is facing severe headwinds in the face of broader weakness in digital assets and macro uncertainty. As the stocks of these companies are declining sharply, ARK’s acquisitions may be impacted in the short term before any recovery. CoinDesk+1
In addition, since ARK’s funds continue to build up crypto-linked exposures investors must be aware of the way these positions affect the overall risk of their portfolio and its performance. The ARK strategy in this case is based on a longer-term perspective, rather than short-term gains. GuruFocus
What to watch next
What will the newly-acquired stocks perform in the next few months: do they stabilize and rebound, or will they suffer more declines?
It is unclear if ARK keeps this pattern of accumulating crypto-related equity in times of market volatility that indicate a rising confidence in the market or a greater willingness to take risks.
The effect of these holdings on the ARK ETF results and the investor’s sentiment, in particular in the event that the overall cryptocurrency market remains sluggish.
Market-structure and regulatory changes in the crypto market that could impact these fundamental business models of companies and valuations.
take-away
In a turbulent market environment, ARK Invest has moved decisively to bolster its holdings in key crypto-infrastructure companies. With the addition of nearly $40 million in new positions, even as the industry is in decline, ARK is showing a smart investment in the future of fintech and crypto’s beneath. The success of this strategy is contingent on the timing and market recovery as well as the capacity of these companies to implement. At present, the message is evident: ARK is doubling down even as other companies pull back. CoinDesk+2Binance+2
