Chris Curl,
Editor
Dec. 1, 2022
Cathie Wood has always been something of a contrarian investor.
Her firm, Ark Invest has often gone against the grain, investing in more speculative and innovative companies. Recently it’s had a lot of exposure to technology companies, and given the current market downturn has been absolutely shellacked.
To be fair, I was also taken aback by how aggressively the Fed raised interest rates to fight inflation this year. Remember, this was the same Fed that for two years told everyone that inflation was nothing to worry about. Then they acted too aggressively, too late — pushing the economy into a recession and causing widespread havoc in international markets and foreign currencies.
The fact that we are poorly led both politically and economically should come as no surprise to you.
And it’s why alternative systems like blockchain and bitcoin exist.
With interest rates rising ever higher, crypto — along with tech stocks — have seen the heaviest casualties.
But we’re now witnessing these negative effects on broader swaths of the economy.
Major companies all over the country are laying off employees en masse. Amazon (NASDAQ: AMZN) is set to layoff 10,000 employees and Meta (NASDAQ: META) more than 11,000. Twitter just cleared out half of its workforce and Robinhood (NASDAQ: HOOD) is laying off over 1,000 workers this year.
The Fed is bleeding the air out of the economy and it’s anyone’s guess as to how bad things get until they pivot.
And given the recent meltdown in the crypto markets due to the FTX collapse, Cathy Wood is eyeing the bottom. In fact, Ark Invest recently purchased 300,000 shares of the struggling Grayscale Bitcoin Trust (NASDAQ: GBTC) – the world’s largest bitcoin fund.
Grayscale has been struggling all year due to the crypto downturn. They were also hampered earlier in the year by the SEC rejecting their application to convert to a spot-traded Bitcoin ETF – it would have been the first in the US. They are currently suing the SEC over what they deem to be an “arbitrary, capricious and discriminatory” ruling.
As such, the price of GBTC has been plummeting. It now trades at a 45% discount to the price of bitcoin. They recently revealed that they would not be disclosing proof-of-reserves citing security concerns and have assured holders that laws and regulations prohibit their products from being lent, borrowed, or otherwise encumbered.
Cathie obviously sees this fledgling fund as undervalued and is taking a gamble. If Grayscale recovers, then buying now will be immensely profitable in the future. If it fails, then you know the rest.
She has also been buying up Coinbase (NASDAQ: COIN) stock.
In the wake of the FTX fiasco, with fears growing about crypto exchange solvency, Coinbase looks like a safe bet. As a publicly traded company registered in the US, Coinbase has to disclose its financials quarterly, and is prohibited from doing any of the crazy stuff FTX was engaged in. It’s likely the safest exchange, along with Kraken, here in the US. And one that I use and recommend for Crypto Cycle.
Ark Invest has added 1.3 million COIN shares, increasing its total stake to 8.3 million – a bold move. Coinbase is now Ark’s 12th largest position.
Time will tell if these moves were smart.
There most certainly is blood in the streets of the crypto market right now.
Even though I don’t think we’ve hit bottom yet, we will soon. Buying the bottom of market cycles is what makes people fortunes.
I’m looking forward to scouting the opportunities that exist in the crypto space and profiting along with my Crypto Cycle subscribers, who are following along with my every move as I navigate a real-money portfolio
Chris Curl
Editor, Daily Profit Cycle