Ark Invest, led by Cathie Wood, demonstrated its confidence in the cryptocurrency exchange Coinbase Global Inc (NASDAQ:COIN) by increasing its stake amidst the Securities and Exchange Commission’s (SEC) crackdown on the crypto industry. This move comes as Coinbase’s stock reached nearly five-month lows.
According to data from Cathie’s Ark, which monitors the investment activities of the Ark group, three funds under Cathie Wood purchased over 400,000 shares of Coinbase on Tuesday. The majority of these shares, totaling over 300,000, were acquired by the flagship ARK Innovation ETF (NYSE:ARKK).
Coinbase’s share price suffered a significant decline of up to 20% after the SEC filed a lawsuit against the company for operating an unlicensed exchange. The SEC also issued cease and desist letters regarding Coinbase’s staking services. In a press release, SEC Chair Gary Gensler stated, “We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions.”
On Tuesday, Coinbase shares settled 12% lower, marking the second session of substantial losses this week following a 9% drop on Monday. However, in aftermarket trading, the shares experienced a 2% increase due to the news of Ark’s purchase.
Cathie Wood has repeatedly expressed her faith in Coinbase and the overall cryptocurrency industry. She has even set a long-term price target of $1 million for Bitcoin, citing its effectiveness as an inflation hedge.
Coinbase holds the fifth-largest weightage in Ark’s flagship Innovation ETF, and the fund has consistently accumulated Coinbase stock since its listing in 2021. Nevertheless, Coinbase’s value has sharply declined from its 2021 highs, reaching record lows earlier this year due to diminished interest in the crypto market caused by rising U.S. lending rates.
The company has encountered profitability challenges, with multiple failed ventures, regulatory obstacles, and mounting operational costs. Additionally, low crypto trading volumes have impacted its transaction margins, a vital revenue source.
While Bitcoin prices demonstrated a minimal response to the SEC’s actions against Coinbase, experiencing a 4% increase on Wednesday, the leading cryptocurrency endured substantial losses throughout May as trading volumes declined.