It is probably not very pleasant to be a crypto investor these days. Bitcoin has fallen 65% since the beginning of the year. And some say it’s not a “crypto winter” but rather a “crypto extinction”.
However, one pundit remains optimistic: Cathy Wood of Ark Invest.
When asked during an interview with Bloomberg if she still stuck to her $1 million per coin bitcoin forecast by 2030, she said yes.
“Sometimes you have to go through a combat test, you have to go through crises to see the survivors first,” she says.
Do not miss
Wood acknowledges that the ongoing crypto crisis could delay institutional adoption, but still believes that Bitcoin will emerge from this “rose-smelling” one.
“Once they actually do their homework and see what happened here, I think they will be more comfortable moving to bitcoin and maybe ether as a first stop.”
With Bitcoin currently trading at around $16,400, its $1 million price target implies 5,998% upside potential.
As always, Wood puts his money into what he says. Here’s a look at how a super investor bets on cryptocurrencies.
Grayscale Bitcoin Trust (GBTC)
With the rise of bitcoin over the past few years, quite a few bitcoin funds have entered the market. Grayscale Bitcoin Trust is one of them.
According to GBTC, its shares are meant to reflect the value of its bitcoin holdings, minus fees and expenses. The fund says it failed to meet this target because its shares traded at a premium or discount to that value, which was “sometimes substantial.”
Since the beginning of the year, GBTC shares have fallen by 75%.
The bankruptcy of cryptocurrency exchange FTX has rocked the cryptocurrency space and is one of the reasons investors are dumping GBTC shares. As a result, GTBC is trading at a deep discount to its underlying asset, bitcoin.
This discount caught Wood’s attention. On Monday, Ark Investment Management was reported to have purchased 176,945 shares of GBTC worth about $1.5 million.
Coinbase Global (COIN)
If you have ever bought bitcoin on an exchange before, you know that there is usually a fee for the transaction. And as more people sought to buy cryptocurrencies, these transaction fees increased rapidly.
This is where Coinbase found its opportunity. As the largest cryptocurrency exchange in the US, it earns a transaction fee every time someone buys or sells a cryptocurrency on its exchange.
Read more: Trade up while the market is down: Here are the best investing apps to take advantage of once-in-a-generation opportunities (even if you’re new)
In the third quarter, Coinbase had 8.5 million users making monthly transactions. It earned $366 million in transaction revenue and $211 million in subscription and service revenue.
Given the decline in cryptocurrencies, it’s no surprise that Coinbase stock has also experienced extreme volatility, with it falling a painful 82% in 2022.
But the company remains in Wood’s portfolio. Ark Invest’s flagship Ark Innovation ETF (ARKK) holds more than 5.9 million Coinbase shares worth about $257.1 million.
The Wood’s Ark Innovation ETF also owns 6.26 million shares of Block, the digital payments technologist formerly known as Square.
With a stake valued at $392.7 million, Block is currently the fifth largest holding in ARKK.
Management changed the name in December last year because “The Square” had become synonymous with the company’s sales business. But the move did little to inspire investors. Shares are down over 60% in 2022.
Although the company is now far from the market leader, it continues to show some very impressive numbers.
In the third quarter, total net revenue rose 17% year on year to $4.52 billion. Gross profit was $1.57 billion, up 38% from a year ago.
The company also plays crypto, with Block generating $1.76 billion in bitcoin revenue and $37 million in gross bitcoin profits in the quarter.
What to read next
This article provides information only and should not be construed as advice. It is provided without any warranty.