Ark Invest CEO and CIO Cathie Wood, a vocal advocate of bitcoin, joins Yahoo Finance to give her insight into the crypto markets, Coinbase's performance, Ark Invest's bitcoin ETF, ARK 21 shares bitcoin (ARKB), and more. Wood adds the trading platform is "executing brilliantly."
On Coinbase, Wood claims that it's the "most compliant exchange out there" from a regulatory perspective. She also notes that it's competition is fading, especially given the collapse of FTX and the issues Binance has been facing.
Wood gives her view on the future of bitcoin: "We do five-year plus forecasts, so we're focused on how institutions and countries and companies might use this new asset class for different reasons. So, we think we have just begun from a price appreciation point of view. This is part of a journey. I do believe the SEC giving the green light has encouraged institutions to think carefully about it and have a point of view, so we're in the learning phase right now, and I think over time that this movement into this new asset class will continue to push up the price."
That fund is the Ark Innovation ETF and Cathie Wood, ARK Invest CEO and CIO is joining us right now. Hi, Cathie. Good to see you.
And there has been a lot of talk about the effect of the introduction of spot Bitcoin ETFs, the effect of the increase in Bitcoin prices. What do you think Coinbase is doing right now?
CATHIE WOOD: Well, one of the things that it's doing right is that it is from a regulatory point of view the most compliant exchange out there. And it's losing all its competition. Last year's demise of FTX was very important.
And even Binance issues have had a positive impact on Coinbase from a market share point of view. I think they're also in the right place at the right time. And they're executing brilliantly.
The market is very volatile. So trading platforms benefit from volatility. And we certainly have had a lot of that recently.
And then, of course, with this spot Bitcoin ETFs coming out, we've seen the price increase. Or there's been volatility around it. But now it seems to be breaking out the price. And that's also good for Coinbase.
So a lot of winds. And, of course, their EBITDA was fantastic. They've turned into profitability.
- Do you think that they will turn in a full-year of profitability here in 2024?
CATHIE WOOD: Of course, a lot depends on what happens to the market. But I do think the signs are pointing up for that. So, yes, Julie, at this time, we do.
- And I'm also curious. You said, you find Coinbase to be the most compliant in the crypto universe in this respect. Of course, the company is still fighting with the Securities and Exchange Commission over-regulation of some of the securities it has listed. Do you think that they're going to-- that the company is going to succeed in its battle with the SEC on that front?
CATHIE WOOD: Well, we think the odds are high. And the reason we say that is because of Ripple's win, Grayscale's win. But especially Ripple's win.
And what we learned about securities and timing of issuance versus trading on a platform when something starts as a security and evolves into something else not a security.
- I also wanted to ask you. I know that in your latest disclosure that you did lighten your Coinbase stake a little bit. I mean, it's still the largest position in your benchmark ETF. But I'm just curious what was behind that move.
CATHIE WOOD: Yes, well, Coinbase has had a magnificent move since all of the regulatory concerns were plaguing it last year. I think it's up more than five fold. And so this is a simple portfolio management.
There are other stocks in the portfolio that are lagging. This has had a great move. And so it's simply trimming, profit taking, and really nothing more than that.
- Let's widen it out a little bit to talk a little bit more about what's been going on in the crypto world. And you were recently out with your big ideas report for 2020 for some of the big investable themes that you watch. One of them is Bitcoin allocation.
And, of course, you're now also in the spot Bitcoin ETF business with the introduction of your new spot Bitcoin ETF with 21 shares. But I want to zero in on that before we get to that. How are you thinking about Bitcoin allocation? How it will affect the underlying price of Bitcoin? And how normal people should be thinking about how much to allocate to something like Bitcoin?
CATHIE WOOD: Yes. So if you look over the history of Bitcoin, the optimal allocation on average over this time period has been roughly 5%. Maybe a little bit below 5%. That's the average.
When we first put Bitcoin or got exposure to Bitcoin through GBTC in 2015, the optimal allocation would have been less than a half a percent. But it's been rising. And I think one of the things that we learned in the last year that I think is encouraging asset allocators to think seriously about Bitcoin is it is not only a risk on asset, but during the regional bank crisis last year, it appreciated as regional banks were falling apart.
And so it has become a flight to quality asset as well. So think about that risk on and risk off. Volatile to be sure. But risk on and risk off, that's quite something.
And then the other thing to consider is institutions are, by and large, have not allocated to Bitcoin. And yet it is a new asset class. And they have to consider the ramifications of that from a diversification point of view.
Diversification into a new asset class that is not highly correlated with other asset classes, stocks, bonds, commodities, and others usually increases returns per unit of risk, which is what allocators want. And the other thing I'll note is the number of Bitcoin outstanding right now is a little over 19.5 million.
The maximum number we will ever see is 21 million. So this scarce asset is getting scarcer. And institutions have not even gotten involved yet in any big way.
- And you know, it's been interesting the move that we've seen in Bitcoin after the introduction and approval and introduction of those spot Bitcoin ETFs like your own. Some folks we've talked to, including you by the way, have said, well, maybe we would see a little bit of weakness just in the wake of that. And then it was a recovery.
But the recovery has actually happened perhaps more quickly than people anticipated. Does that change the calculus for where Bitcoin might get by the end of this year, for example?
CATHIE WOOD: Yeah, as you know, we do five-year plus forecasts. And so we're focused on how institutions, and countries, and companies might use this new asset class for different reasons. And so we think we've just begun from a price appreciation point of view. This is part of a journey.
I do believe that the SEC giving the green light has encouraged institutions to think carefully about it and have a point of view. So we're in the learning phase right now. And I think over time, that this movement into this new asset class will continue to push up the price whether it happens this year.
There's always there are always short-term causes for volatility. So a one-year period is pretty short. But over a five-year period, our confidence is very high.
- And let's talk about the communists in that spot Bitcoin ETF. The 21 shares product that I have alluded to a couple of times has already reached a little over a billion in assets. About $1.3 billion in assets I believe.
The two largest products remain BlackRock and Fidelity's offerings. How are you looking at the competitive landscape now that we're a little bit into it? And what are you targeting for the size of that product?
I mean, maybe you're looking at a five-year projection. I don't know. But what are your hopes for that?
CATHIE WOOD: Well, it has been very successful. And we are very pleased to be number 3. If you're excluding GBTC which has a much higher fee than any of us, then you've got BlackRock, Fidelity, and ARK 21 shares. That is fine company. And we are very pleased to be number 3.
I think one of the reasons we are is our history with Bitcoin. We've been doing research on Bitcoin, and publishing, and giving it away since 2014. Another reason we think we're being successful is we have an incredible sales team at resolute who has had to get its head around Bitcoin since 2016 when very few people thought it should have a place in a portfolio.
They have developed confidence. They can explain it. And they can hold hands through volatility.
And I think the other thing is our ops, our infrastructure and ops with our partner 21 shares is showing itself to be a very efficient. And you can tell that in terms of spread. Sometimes we'll have the tightest spreads in the market.
So I think we're firing on all cylinders. And I'm just so proud of everyone who's been involved on this journey with us.
Cathie I want to switch gears. I guess we can have a conversation these days without talking about Tesla it feels like. So I've got to ask you about Tesla.
Do you think that the company should be-- would you as the shareholder vote for Tesla switching its domicile from Delaware to Texas?
CATHIE WOOD: We're very supportive of that. What happened in Delaware, the judge ruling and basically taking the vote away from us, the shareholder. We voted for that pay package. 73% of shareholders did.
And to have the judge kind of thinking that she is reading the minds of directors, and independence, dependence, whatever I just think. As I said in a post on X, I think it's un-American. It's anti-investor. And it's an insult to the board of directors of Tesla. So totally supportive of that move.
- Are you supportive of Elon Musk's requests, or demands, or whatever you want to call it to get more voting shares? Or as he says he'll take some of his technology elsewhere. Or do you feel as though Tesla's sort of being held hostage to that demand?
CATHIE WOOD: I do not feel that. Being involved in disruptive innovation and only disruptive innovation, we know that we need visionary leaders who will stand up to short-term oriented shareholders and be able to execute their vision with the right technologies at the right time.
And Elon Musk is the inventor of our age. And he is also our Renaissance man. So I'm always surprised at the pushback he receives.
And I do think that 25-- he's not asking for any more economic interest. It's voting interest. And for many of our companies, we are supportive of super voting rights because we know the visionary leaders, we go through periods of volatility.
And they just need to be able to execute upon their vision not be thrown off by boards of directors who are listening to short-term oriented shareholders and swayed by them.
- Well, it's true that Tesla is going through a period of volatility right now. We've got to leave it there, Cathie. We will catch up again soon. Thank you so much.
CATHIE WOOD: Thank you, Julie.
