Cathie Wood's Ark Invest offloaded a chunk of its Grayscale Bitcoin Trust (GBTC) shares since November's Bitcoin (BTC) price lows, the latest data shows.
Cathie Wood's Ark short-term cautious on GBTC
Ark Invest added 450,272 GBTC shares worth $4.5 million to its ARK Next Generation Internet ETF (ARKW) in November 2022. At the time, GBTC was trading in the $7.46-$9.48 range versus $12.25 in January 2023.
GBTC price, of course, recovered alongside Bitcoin, rising roughly 40% from its November lows. The recovery in January also helped reduce the GBTC "discount" from nearly 50% to 40%, according to YCharts.
Interestingly, the share price rebound coincided with a reduction in ARKW's GBTC holdings by 500,000 shares, suggesting profit taking in the short term.
Moreover, Ark's reduction in shares since November appears in line with its officially "bearish view" on the Grayscale Bitcoin Trust, as mentioned in its December report, which stated that:
"The Digital Currency Group (DCG) appears to be one of the biggest questions marks in the crypto industry at this time."
The company also expressed concerns about Genesis Global, a cryptocurrency lender owned by DCG. Genesis filed for bankruptcy while claiming $1 billion to $10 billion in liabilities to over 100,000 creditors.
Meanwhile, Grayscale has been unable to convert its Bitcoin trust into an ETF following rejections from the U.S. Securities and Exchange Commission (SEC). As Cointelegraph reported, an approval from the SEC could reset GBTC's discount to zero.
Nonetheless, as of Jan. 23, GBTC's share weight in Ark's portfolio has actually increased to 0.52% compared to its November 2022 low of 0.35%.
Ark adds $17.6M in Coinbase stock
Ark's selling of GBTC shares in the past weeks coincided with accumulation of Coinbase (COIN) shares.
Cathie Wood's ARKW added 320,000 COIN shares (about $17.6 million) in 2023. As a result, the Coinbase stock's weight in Ark Invest's combined ETF portfolios has reached nearly 3.62% on Jan. 23 versus 2.73% at the start of this year.
Overall, Ark appears to be only increasing its exposure to the Bitcoin market, particularly as Wood is well known for her consistent $1 million BTC price prediction by 2030.
Can the GBTC price rally continue?
Similarly, Greenery Financial, an investment strategy firm, confirmed that it had shifted its GBTC exposure to ProShares Bitcoin Strategy ETF (BITO) due to the above-mentioned risks around DCG.
"Any bad news, be it Cathie Wood selling out of GBTC or DCG going bankrupt, will spark the same fears and doubt - of uncertainty - and likely cause an expansion of the discount once again," the firm warned in its SeekingAlpha note, saying:
"With Bitcoin having no real catalyst in the short term and plenty of potential downside catalysts, there are plenty of risks here from the NAV side as well."
Nonetheless Bitcoin and GBTC prices may keep on rallying through Q1 from a technical perspective.
On the daily chart, GBTC has reclaimed its 50-day exponential moving average (50-day EMA; the red wave in the chart below) near $9.68 as support.
Upward momentum could see it test the 200-day EMA (the blue wave) near $15 if it continues to float above the 50-day EMA wave, similar to what happened in March-April 2022.
The technical upside target falls in line with what Pat Tschosik, senior portfolio strategist at Ned Davis Research, predicts about the Grayscale Bitcoin Trust.
He argues that GBTC price could not only double by mid-2023, but also narrow the extant discount gap with Bitcoin's spot price.
“We recommend GBTC…as a way to play Bitcoin because it has a ‘potential NAV kicker rebate,’ which not only means it would go up if Bitcoin goes up, but also closing its current large 35% rebate on NAV,” Ned Davis Research said in a note to clients.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.