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Cathie Wood’s Ark Is Buying Coinbase, Should You?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsMay 21, 2021 09:33AM ET
www.investing.com/analysis/cathie-woods-ark-is-buying-coinbase-should-you-200581517
Cathie Wood’s Ark Is Buying Coinbase, Should You?
By Investing.com (Haris Anwar/Investing.com)   |  May 21, 2021 09:33AM ET
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Investors in cryptocurrencies are in for a wild ride, and so are the stocks associated with this highly volatile asset class. 

Coinbase Global (NASDAQ:COIN) closed Wednesday at a record low after a wild trading session that saw the price of Bitcoin swing by about $10,000. The largest US cryptocurrency exchange fell as much as 13% before paring the loss to close down 5.9% at $224.80 amid a broader rout in cryptocurrencies. Yesterday, Coinbase gained about 3.8% to close at $233.39.

Since its initial public offering last month, Coinbase has lost more than a third of its value. The decline of this magnitude is prompting some proponents of this asset class to jump in and buy this beaten-down stock. 

COIN 2 Hr
COIN 2 Hr

Ark Invest’s Cathie Wood is doubling down on her Coinbase bet, snapping up more shares of the cryptocurrency exchange as its value declines. Wood has purchased more than $90 million of Coinbase since Monday, according to the firm’s trading wrapper.

The head of Ark Investment Management said in an interview on Bloomberg TV that she still expects the cryptocurrency to reach a price of $500,000.

She said:

“We go through soul searching times like this and scrape the models, and yes our conviction is just as high.”

Sharp moves in cryptocurrencies should not scare investors away from the strong underlying business of Coinbase, according to investment firm Wedbush. Analyst Moshe Katri, while initiating coverage of the stock this week, assigned an “outperform rating” to it with a price target of $275 a share. 

According to the note:

“We view COIN as a ‘one stop shop’ platform, enabling roughly 56 million retail users, 8,000 institutions, and 134,000 ecosystem partners in over 100 countries to participate in the crypto economy.”

Bitcoin Bubble Near Bursting?

These bullish calls have some rationale, but retail investors should note that Coinbase’s revenue is built almost entirely on the performance of Bitcoin and Ethereum, which are showing signs of peaking in the current cycle. And if this is the beginning of a bubble being burst, then we still have a long way to go. 

Bitcoin has experienced two crashes of more than 80% in its short history. Another such crash will mean reduced profitability for Coinbase, which generates most of its revenue from trading fees. The extreme volatility this week suggests that a crash of this magnitude is still possible.

The recent price fall accelerated after Elon Musk, who has a cult-type following in the speculative trading community, said Tesla (NASDAQ:TSLA) would cease accepting Bitcoin as a payment option for its electric cars, pointing to environmental hazards its mining process creates. That sudden U-turn came after months of bullish comments he made about Bitcoin, Dogecoin and other digital currencies, becoming one of the biggest market movers.  

After Musk’s shock came the People’s Bank of China statement that reiterated that digital tokens can’t be used as a form of payment. China has in the past issued other restrictions on cryptocurrencies, but the new ban and the reaction shows the crypto market is still sensitive to regulatory efforts. 

Adding to regulatory concerns is the statement made by US Treasury Secretary Janet Yellen in January during her confirmation hearing that many cryptocurrencies are used “mainly for illicit financing, and I think we really need to examine ways in which we can curtail their use.”

Bottom Line

Coinbase stock has become attractive after a sharp pullback, providing long-term investors a chance to buy this name at a much cheaper price than a month ago when its stock was trading above $400. 

But the ongoing volatility in the market and the possibility of regulatory actions may hurt the company’s revenue going forward. These uncertainties associated with the crypto market make Coinbase only suitable for investors who have a very high risk tolerance and deep pockets to absorb big losses.

Cathie Wood’s Ark Is Buying Coinbase, Should You?
 

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Cathie Wood’s Ark Is Buying Coinbase, Should You?

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Comments (22)
Jeffrey Whittinghill
Jeffrey Whittinghill May 23, 2021 7:59PM ET
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Heck no. Crypto is trash
Bill Maxwell
Bill Maxwell May 22, 2021 3:02PM ET
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Almost all tech markets recover. She’s smart. She’s increasing risk as the declines increase. That way when there’s a recovery, these funds will at least double from current values.
Gershom Zvi
Gershom Zvi May 22, 2021 12:55PM ET
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Who is buying ARK now ?
Gershom Zvi
Gershom Zvi May 22, 2021 12:52PM ET
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She is too active buying in risky Biden’s market Very dangerous game in bad stockmarket manegment
Bill Maxwell
Bill Maxwell May 22, 2021 12:52PM ET
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I trust her opionion more than yours. Come back when you have $50+ billion assets under management.
Jason Mills
Jason Mills May 22, 2021 12:52PM ET
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*management
Khwarizmi Algebra
Khwarizmi Algebra May 22, 2021 7:12AM ET
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ARK is far more riskier than before as the surrounding economy is changing. 2020 was bull rally but I dont think will ever continue. Hence, correction is unavoidable for all markets (cryptos, stocks, and real estates) in my opinion.
Allatra Yiveh
AllatraYiveh May 21, 2021 2:02PM ET
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Just look at her ARK performance. I rest my case.
Buncula Bunny
Buncula Bunny May 21, 2021 1:46PM ET
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Bought a tiny amount of crypto (Ether, Stellar Lumens, Litecoin) yesterday on Coinbase. It's a novelty app to me, but I remember thinking Bitcoin was insane at $150 over a decade ago. So, I'm happy to have a tiny amount of skin in the game AND I wouldn't have bothered if not for Coinbase. Just sayin'. P.S. I'm not holding Coinbase shares.
William Smiley
William Smiley May 21, 2021 1:46PM ET
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XLM, ADA, GRT, ALGO, & MATIC are the cryptos that are going to make a difference. They have solutions. After XRP, they'll come after ETH. XRP will be fine
MfB Iod
MfB Iod May 21, 2021 1:40PM ET
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Should I? ********no. She buys like a Gen Z and huge market cap companies.
foon-lung YANG
foon-lung YANG May 21, 2021 1:37PM ET
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she wants to sell to who?? yes you the guy who follow her advice to buy HAHAHA
foon-lung YANG
foon-lung YANG May 21, 2021 1:36PM ET
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US and  EUROPE will ban Krypto Bankrup
Harpreet Marwah
Harpreet Marwah May 21, 2021 1:18PM ET
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Is coinbase is an ETF or coin ks independst cryoto
Samantha Sa
Samantha Sa May 21, 2021 1:18PM ET
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It's a trading platform for crypto currencies.
Heine Pedersen
Heine Pedersen May 21, 2021 1:07PM ET
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Ark is gonna crash and burn
Danny Danny
Danny Danny May 21, 2021 1:06PM ET
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Yes, at $20
Carla Castro
Carla Castro May 21, 2021 1:05PM ET
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What Happened with Cathy Woods, her performance is terrible.
TJ Theodore
TJ Theodore May 21, 2021 1:03PM ET
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Mox Mox
Mox Mox May 21, 2021 12:13PM ET
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in 10 years, when she gets in jail, we will look back and ask ourselves, how could that happen?
David Smith
David Smith May 21, 2021 12:02PM ET
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Cryptos always had insane volatility. You'll need nerves of steel to invest in it.
Hold This Sheet
Hold This Sheet May 21, 2021 11:11AM ET
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Never like ARK!
Joseph Obrzut
jzut May 21, 2021 11:01AM ET
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Not me.
Cosmic Dust
Cosmic Dust May 21, 2021 10:40AM ET
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Her judgement is questionable. Might be the next one to *******up. Wait and see.
Cheela Jee
Cheela Jee May 21, 2021 7:42AM ET
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Cheela jee
Francesco Lucchesi
Francesco Lucchesi May 21, 2021 5:15AM ET
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no way let her buy it
 
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