Ark Invest stakes $30M in Circle as shares dip after positive earnings report

Global asset manager Ark Invest purchased approximately 353,328 Circle shares worth around $30.5 million across three of its exchange-traded funds on Wednesday. The initiative comes as the USDC stablecoin issuer’s stock dropped 12.2% on Wednesday to close at $86.2.

Cathie Wood’s ARK Innovation ETF (ARKK) added 245,830 shares of Circle to its holdings, while the ARK Next Generation Internet ETF (ARKW) purchased 70,613 shares of the stablecoin issuer. The asset manager’s ARK Fintech innovation ETF (ARKF) also added 36,885 Circle shares to its holdings.

Drop in Circle’s shares leads to massive investments

Cathie Wood’s company has been rebalancing its portfolios in recent weeks by trimming some long-held positions and increasing its investments in more innovative firms, including Circle. The USDC issuer has also drawn sustained institutional interest this year, driven by the surge in institutional stablecoin adoption and Circle’s flurry of partnerships.

The drop in Circle’s shares came despite the firm reporting strong third-quarter results on Wednesday. The firm’s founder and CEO, Jeremy Allaire, confirmed that Circle had made huge progress in delivering platforms to leading startups and financial firms.

The USDC issuer saw its total revenue increase to around $740 million, representing a 66% year-over-year surge. The firm reported a net income increase to $214 million. On-chain data also revealed that USDC circulation reached $73.7 billion during the period, representing an 108% increase from the same time last year.

Analysts at investment bank William Blair on Wednesday urged investors to double down on Circle’s stock to leverage its 12% drop in stock prices. The analysts rated the stock as outperforming in an equity research report released on Wednesday. They also acknowledged that Circle remains a leader in the industry as it builds out critical network infrastructure, including Circle Payments Network and Arc.

The analysts also highlighted that building Circle positions on weakness in its share price comes with outlined key risks. The risks include regulatory uncertainty, industry fragmentation, inadequate stablecoin infrastructure, corporate inertia, intensifying competition, and potential pressure from lower interest rates.

However, there are concerns that Circle’s dependency on interest from sources like short-term Treasury bills could face headwinds as markets adjust to a series of Federal Reserve rate cuts next year. Circle CFO Fox-Green refuted those concerns, saying that the USD issuer is well-positioned to grow even in a lower-rate environment. 

Fox-Green acknowledged that the company has been delivering sustained growth in the current rate-cutting cycle. He also argued that lower rates lead to greater economic activity, more risk-taking, and increased investments.

Cathie Wood trims her investment in Bitcoin

Cathie Wood’s company recently increased its investment in Ethereum-focused firms, including the purchase of 240,507 shares of Bitmine Immersion. The increased exposure followed Wood’s reduction of her long-term Bitcoin position, citing rising competition from stablecoins.

Wood revealed last week that she has lowered her bullish case for Bitcoin by about $300,000 to $1.2 million by 2030. She noted that stablecoins were replacing the utility once envisioned for Bitcoin in emerging markets.

“Stablecoins…are happening faster. They’re scaling faster. I think emerging markets are huge in this regard. And we’re starting to see institutions in the United States focused on new payment rails with stablecoins at the core.”

–Cathie Wood, CEO of Ark Invest.

The investment in Bitmine comes as the firm has positioned itself as an early leader in the Ethereum treasury space. The firm has seen a 700% surge in its shares year-to-date, increasing from around $5 to a record $161 in October, before settling in the mid-$50s.

Lee revealed in Wood’s podcast last month that the ETH treasury company now ranks around the 470th largest U.S. company by market capitalization. The tech executive projects that Bitmine’s forthcoming staking solution could generate a 2.79% pre-tax yield. According to him, the yield would place Bitmine among the 800 most profitable companies in the country.

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