Ark Invest, the investment firm led by Cathie Wood, has sold some of its holdings in Coinbase and Grayscale Bitcoin Trust (GBTC) as the cryptocurrency market continues to rally. According to the firm’s daily trade summary, Ark sold 81,600 shares of Coinbase and 57,043 shares of GBTC on Thursday, October 26. The combined value of the sales was about $16.5 million, based on the closing prices of Coinbase and GBTC on that day.
The sales come as bitcoin, the largest cryptocurrency by market capitalization, reached a new all-time high of over $35,000 on Wednesday, October 20. The rally was driven by several factors, including the launch of the first bitcoin futures exchange-traded fund (ETF) in the US, increased institutional adoption, and positive regulatory signals from some countries. Bitcoin has gained more than 120% year-to-date, outperforming most traditional assets.
Coinbase and GBTC are two of the most popular ways for investors to gain exposure to the cryptocurrency market. Coinbase is the largest crypto exchange in the US, offering a variety of services such as trading, custody, staking, and lending. GBTC is a trust that holds bitcoin and issues shares that trade on the over-the-counter market. GBTC is often seen as a proxy for bitcoin, as its share price tends to track the price of the underlying asset.
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However, both Coinbase and GBTC have faced some challenges recently. Coinbase has been under pressure from regulators and lawmakers over its plans to launch a lending product called Lend, which would allow users to earn interest on their crypto holdings. The Securities and Exchange Commission (SEC) has threatened to sue Coinbase if it launches Lend, claiming that it would violate securities laws. Coinbase has since decided to shelve Lend and focus on other products.
GBTC, on the other hand, has been suffering from a persistent discount to its net asset value (NAV), meaning that its shares are trading below the value of the bitcoin it holds. This is partly due to the emergence of more competitive products, such as bitcoin ETFs, which offer lower fees and better liquidity. GBTC’s sponsor, Grayscale Investments, has been working on converting GBTC into an ETF, but it is still awaiting approval from the SEC.
Ark Invest is known for its bullish stance on disruptive technologies, such as crypto, artificial intelligence, biotech, and fintech. The firm has been one of the most active buyers of Coinbase and GBTC shares since their inception. As of October 26, Ark held about 4.4 million shares of Coinbase and 8.9 million shares of GBTC across its various funds. The firm has also invested directly in bitcoin and other cryptocurrencies through its partnership with 21Shares.
Ark’s decision to sell some of its Coinbase and GBTC shares does not necessarily mean that it is bearish on crypto. The firm frequently rebalances its portfolio to adjust its weightings and allocations based on market conditions and performance. Ark may also use the proceeds from the sales to buy other crypto-related stocks or assets that it deems more attractive or undervalued. Ark’s founder and CEO, Cathie Wood, has repeatedly expressed her confidence in the long-term potential of crypto and has said that she expects bitcoin to reach $500,000 in the next five years.
The price of Bitcoin (BTC) soared to a new all-time high of $35,000 on Wednesday, October 20. The bullish momentum triggered a massive wave of short liquidations on derivatives platforms, as traders who bet against the market were forced to close their positions at a loss.
According to data from Bybt, a crypto analytics platform, over $220 million worth of Bitcoin short contracts were liquidated in the past 24 hours, with the largest single liquidation order occurring on Binance, worth $10.3 million. The liquidations peaked around 12:00 UTC, when Bitcoin broke above $35,000 and reached a new record high.
Short liquidations occur when the market moves against the traders who have borrowed funds to sell an asset they do not own, hoping to buy it back at a lower price and pocket the difference. However, if the price rises above a certain threshold, known as the liquidation price, the traders are automatically closed out of their positions by the platform to prevent further losses. This creates a positive feedback loop, as the closing of short positions adds more buying pressure to the market, pushing the price even higher.
The launch of the ProShares Bitcoin Strategy ETF (BITO) on Tuesday, October 19, was a major catalyst for the Bitcoin rally, as it marked the first time that US investors could gain exposure to Bitcoin through a regulated and mainstream investment vehicle. The ETF tracks the performance of Bitcoin futures contracts, rather than the spot price of Bitcoin, and trades on the New York Stock Exchange (NYSE) under the ticker BITO.
The ETF attracted a huge demand on its debut day, with over $1 billion worth of shares traded, making it one of the most successful ETF launches in history. The high volume also caused some technical issues on the NYSE website, which briefly displayed incorrect prices for BITO. The ETF closed at $41.94 per share on Wednesday, up 4.8% from its opening price of $40.02.
The success of the ProShares ETF could pave the way for more Bitcoin-related products in the US market, as several other firms have filed applications for similar funds with the Securities and Exchange Commission (SEC). Some analysts expect that the SEC could eventually approve a Bitcoin spot ETF, which would track the actual price of Bitcoin rather than futures contracts and offer lower fees and less complexity for investors.