The investing community pays attention when Cathie Wood (the CEO of ARK Invest) talks. Each of Ark's six actively traded exchange-traded funds (ETFs) is focused on long-term growth and paradigm-shifting technologies.
Aside from electric cars, Bitcoin is one of Wood's most vocal ideas (CRYPTO: BTC). As a result, it's no surprise that the investment management firm's numerous funds own shares in Coinbase Global, one of the world's major cryptocurrency exchanges (NASDAQ: COIN). However, the sheer volume of shares purchased by these funds in the two months after the company's public listing is startling. Let's look into ARK's Coinbase stock holdings, as well as the company's strengths and shortcomings, to see whether Coinbase is a stock worth investing in right now.
ARK's Coinbase stock holdings
As of June 16, ARK's funds owned a total of 4.63 million Coinbase shares, valued at roughly $1.04 billion at the time of writing. That's approximately 2% of Coinbase's fully diluted capitalization, which includes ordinary stock, options, and restricted stock, totaling 261.3 million shares. As a result, Ark is now one of Coinbase's largest institutional investors.
Coinbase is the most popular bitcoin wallet and exchange in the United States. Last year's first quarter (Q1) saw 34 million verified users, resulting in revenue of $1.28 billion and net profits of $322 million for the entire year of 2020. But that was nothing compared to the year's first quarter. Coinbase ended the quarter with 56 million verified users, $1.8 billion in sales, and $771 million in net income, resulting in a profit margin of 43%, compared to 25% for the full year 2020. In addition, the collective market worth of all tokens rose from $800 billion in 2020 to over $2 trillion by the end of Q1 2021, indicating that Coinbase profited from a rise in cryptocurrency trading and prices.
The minimum trading cost on Coinbase is 1.49 percent each transaction. While it earns money from both purchasing and selling assets, it makes more money when bitcoin values are rising. Increased asset under management, trading volumes, and maybe more users accessing its platform to attempt to grab a piece of the action mean higher values.
Coinbase is profiting from growing institutional use of Bitcoin in addition to cryptocurrency pricing. Cathie Wood's Bitcoin optimism stems from believing that the more normal businesses (rather than simply banks and fintech platforms) keep Bitcoin on their balance sheets, the higher its value and reputation will rise. Coinbase's institutional trading volumes in Q1 were roughly 80% greater than retail trading volumes, which may surprise you. Bitcoin and Ethereum (CRYPTO: ETH), which account for over 75% of the assets housed on the Coinbase platform, contributed a significant portion of that. To put it another way, the bitcoin business has matured and is now controlled by substantial firms, a long cry from its seedy beginnings.
To summarize, Coinbase is one of the few businesses that can boast both profitability and significant growth potential. The management is confident that the boom may continue into the second quarter. They are noting the cryptocurrency industry's cyclicality/ excellent and negative implications. As a result, the ARK Innovation ETF (NYSEMKT: ARKK), ARK Next Generation Internet ETF (NYSEMKT: ARKW), and ARK Fintech Innovation ETF (NYSEMKT: ARKF) have been steadily adding shares after a large buy during the first week of Coinbase's direct listing.
Cathie Wood and her colleagues have been buying Coinbase stock because they believe in Bitcoin's future as an asset class and a store of value. Given Coinbase's Q1 results and Q2 predictions, the company's 2021 statistics are expected to be fantastic, resulting in stellar valuation ratios. The main concern is whether it will be able to keep up its tremendous pace.
Before plunging fully into cryptocurrency-related ventures, investors new to the area should spend some time studying the various forms of cryptocurrencies. Coinbase, on the other hand, appears to be one of the finest cryptocurrency stocks out now for investors who already hold Bitcoin or Ethereum or who are just wanting to establish a stake in shares rather than tokens.
