Ark Invest Dumping Crypto Stocks But Investors Are Coming Back
Ark Invest has sold over $100 million of crypto shares in one week as rising prices force it to dump Coinbase stocks. But a new $500 million fund is interested in acquiring stakes in crypto companies.
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Ark Invest, led by Cathie Wood, sold off 335,860 Coinbase shares worth approximately $50 million on Friday, December 8. That was the fourth time last week that the asset manager sold COIN shares, making it over $100 million worth of Coinbase shares sold in just one week.
However, COIN was not the only crypto-related stock Ark Invest has sold recently. The firm has also been dumping Grayscale Bitcoin Trust stocks. In November, it sold over $21 million worth of GBTC. It has continued with the sale pattern this month.
Why Ark Invest is Selling Crypto Stocks
These sales have led to various speculations that Ark Invest might be reducing its cryptocurrency exposure. However, experts believe that is not the case. The consensus is that the sell-offs are primarily an attempt by the firm to profit from its investments.
Crypto-related stocks are performing exceptionally well, enjoying their best time in over a year. COIN has surged by 291% year-to-date, and GBTC has gained 267% in the same period. This represents a considerable gain for investors, although the shares are still significantly below their peak price.
Meanwhile, Ark Invest's investment strategy and the recent performance of Coinbase also prompted the asset manager to take action. Ark follows an ETF strategy where the weighting of a company's stock in its portfolio should not exceed 10% or drop below 2%.
However, Coinbase's recent gains mean COIN's weighting on its ETF has exceeded 10%. COIN accounts for 11% of the value of its flagship fund, ARKK, and ARK Next Generation Internet ETF (ARKW). It also represents over 13% of Fintech Innovation ETF(ARKF).
COIN still holds a higher percentage of ETFs than it ought to, so Ark may need to sell more COIN stocks before the end of the year. These sell-offs are unlikely to impact Coinbase stocks significantly as long as Bitcoin's value continues to rise. However, if BTC's value drops, it could lead to a correction in COIN's price. The drop in BTC value on December 11 resulted in a more than 6% decline in COIN.
Investors Showing Interest in Crypto Again
Meanwhile, the ongoing bull run in the cryptocurrency market has caught the attention of investors. According to a report by the Australian Financial Review, CI Fund is targeting secondary shares of cryptocurrency companies.
The $500 million fund, led by former Coinbase employees, has been meeting with venture capital firms to buy their stakes in crypto companies. But only at discounted prices ranging from 50% to 80%.
Companies on the fund radar include blockchain games developer Animoca Brands and blockchain intelligence firm Chainanalysis. However, the timing may not favor CI Fund. The recent resurgence of the crypto market has made more investors more optimistic about the potential of their investments to turn a profit.
