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ARK’s Balancing Act: Why is Cathie Wood’s Firm Offloading Coinbase Stock?

Last Updated December 18, 2023 11:27 AM
Teuta Franjkovic
Last Updated December 18, 2023 11:27 AM

Key Takeaways

  • ARK profits off Coinbase rally but continues selling.
  • Narrowing GBTC discount triggers Ark’s Grayscale exit.
  • While ARK focuses on capitalizing on individual asset gains, BTC faces larger market forces causing it to fall.

Investment management firm ARK Invest is capitalizing on the bullish sentiment in the cryptocurrency market by continuing its significant sell-off  of Coinbase (COIN) and Grayscale Bitcoin Trust (GBTC) shares.

This move comes as both COIN and GBTC shares reach new 52-week highs, indicating a strategy of profit booking by ARK Invest’s funds amidst the current market optimism.

ARK Takes $59 Million Profit from COIN Rally

Last week, ARK Invest continued its active divestment from crypto exchange Coinbase, selling shares worth $59 million. This included a $2.8 million sale of 18,962 COIN shares last week. CEO Cathie Wood’s firm liquidated 12,142 shares ($1.8 million) from its Innovation exchange-traded fund (ETF), 2,278 shares ($337,000) from the Next Generation Internet ETF, and 4,542 shares ($672,000) from the Fintech Innovation ETF.

This follows their sale of $42.6 million, $11.5 million, and $1.9 million worth of COIN on Wednesday, Tuesday, and Monday respectively, culminating in a total of $58.8 million in sales for the week. This is in addition to the $100 million in Coinbase shares sold the previous week, as ARK continues adjusting its fund allocations in response to recent increases in COIN’s value.

Coinbase’s stock showed a notable performance, closing at $147.90 on last Friday. This represents an increase  of about 4.5% for the week, 50% over the past month, and a surge of more than 305% so far this year, marking its highest value since April 2022.

Despite this, the stock is still approximately 60% below its all-time high of around $343, reached in the peak of the crypto bull market in November 2021. As of December 18, Coinbase is worth approximately $27.5 billion.

COIN Chart
Credit : TradingView

Selling Bitcoin Trust Despite Record Highs

Last week, ARK Invest continued selling as it offloaded 12,000 shares in Grayscale Bitcoin Trust (GBTC), valued at approximately $409,000, as the GBTC stock experienced gains. This sale coincided with the narrowing of GBTC’s discount-to-NAV to its lowest point since July 2021. In addition to selling $1.6 million worth of GBTC shares on Wednesday and $12.9 million on Monday, ARK’s total divestment in GBTC amounted to around $14.9 million for the week.

At the market close on Friday, GBTC shares were trading  at $34.10, reflecting a near 2% increase for the week and a significant 315% rise year-to-date. However, they were still around 40% lower than their peak of $56.70, reached in February 2021.

On Friday, the daily trading volume for Grayscale Bitcoin Trust (GBTC) reached $143 million. This figure, however, is substantially lower compared to its peak volume of $1.5 billion in 2021.

GBTC chart
Credit: TradingView

Shrinking Discount, Shifting Strategy

ARK Invest’s recent sale of GBTC shares come amid a significant decrease in GBTC’s discount to its net asset value (NAV). Over recent months, this discount has narrowed from 44% in June to 7.4% on December 14, marking the smallest gap in roughly two and a half years. The discount to NAV refers to the extent to which the market price per share is lower than the value of the Bitcoin it represents. As of now, GBTC’s discount to NAV stands at 9.87%.

Last week, Bitcoin’s trajectory diverged, experiencing a decline of about 5% and ending an eight-week run of consecutive weekly gains. Currently, Bitcoin is trading at approximately $41,018.

ARK Invest’s recent decision to sell shares of GBTC and Coinbase can be attributed to several aforementioned strategic factors.   Furthermore, the broader cryptocurrency market, including Bitcoin, has experienced volatility, with Bitcoin recently ending an eight-week growth streak, which may have influenced ARK’s decision to divest and capitalize on the recent price surges.

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