Cathie Wood’s Ark buys $60 million in Bitcoin, crypto stocks after FTX collapse even as analysts fear contagion risk
Top line
Even as bitcoin prices have plunged to two-year lows, Ark Invest, the investment firm led by high-profile stock picker Cathie Wood, has doubled down on the struggling sector in the days since stricken crypto exchange FTX filed for bankruptcy – defying many analysts at to buy more than $60 million in crypto-related stocks as the firm insists that conviction in the space is as high as ever.
Cathie Wood of Ark Investments photographed in September 2020 by Eli Warren for Forbes.
Keywords
According to Ark’s daily transaction reports, three of the firm’s funds, including the flagship Ark Innovation ETF, have invested $62.7 million in shares of Coinbase, crypto bank Silvergate and Grayscale Bitcoin Trust since Nov. 11 — the day FTX announced its sudden liquidity crisis this month forced the firm to to go bankrupt.
Ark’s investment in Grayscale Bitcoin Trust, which tracks the price of the world’s largest cryptocurrency but does not force investors to buy or hold it directly, marks the firm’s first in the fund since July 2021 – right after the price of bitcoin collapsed 45% over a period of two months.
Ark did not immediately respond to Forbes‘ request for comment; However, Ark research director Frank Downing acknowledged in a Monday note that contagion has spread in response to the FTX bankruptcy, but he said Ark’s “belief in decentralized and transparent public blockchains is as strong as ever.”
The transactions come as the price of bitcoin fell to a two-year low of less than $15,600 on Monday — pushing losses to more than 20% during the FTX turmoil, according to CoinMarketCap.
Despite Ark’s growing bullishness, several analysts haven’t been so optimistic about the crypto space: In a Friday note, Mizuho analyst Dan Dolev noted that Coinbase’s daily trading volume has fallen roughly 35% below its annual average — “suggesting jaded consumers who seem disinterested.” in the “deteriorating” crypto industry.
The FTX collapse “reduced confidence in the crypto ecosystem” and has created new headwinds “that call for extra caution” when investing in stocks like Coinbase, Bank of America’s Jason Kupferberg wrote in a note on Friday, adding that he worries that ” risk of infection” may linger. as some users sell their assets to “leave crypto altogether.”
Versus
Despite soaring nearly 150% in 2020, Ark’s Innovation ETF fell 24% last year and has cratered 59% in 2022. By comparison, the S&P 500 is down 30% this year. In addition to crypto stocks, Ark’s other big buys this month include biotechs Ginkgo and Tesla, which are down 76% and 58% this year, respectively.
Tangent
In JPMorgan’s latest client survey, about 82% of respondents said they expect crypto prices to fall at least another 10% after the FTX collapse, including about 28% who said prices will crash by at least 50%. A majority of respondents (62%) believe the crypto winter will last at least another year.
Key background
Fears of global recession and the worst inflation in more than 40 years have wreaked havoc on the nascent cryptocurrency market this year – forcing once-high-flying firms into bankruptcy and investors into panic-selling mode. The turmoil has claimed more than $2 trillion in market capitalization over the past year, and the situation only worsened this month with the sudden collapse of FTX, one of the world’s largest crypto exchanges. The revelation has since spread to other firms, including crypto lender Genesis, which suspended withdrawals last week and accused FTX of creating “unprecedented market turmoil.” On Monday, Genesis, which had about $2.8 billion in loan volume at the end of last quarter, warned investors that it could face bankruptcy if efforts to raise new capital fail.
Further reading
With a new CEO, an adult has arrived to clean up the FTX mess (Forbes)
FTX ‘contagion risk’ burns Coinbase stock (Forbes)
