On Wednesday, Coinbase shares fell 10% amid the Federal Reserve’s more hawkish monetary policy. Shortly after, Ark Invest, led by Cathie Wood, sold 13,780 Coinbase shares from its Fintech Innovation ETF (ARKF) for $3.9 million.
The sale was Ark’s biggest stock selloff since September 23, the previous time they sold $2.8 million worth of Coinbase shares. Ark's investment strategy generally tends to avoid a single holding accounting for more than 10% of an ETF portfolio, which helps ensure the fund's diversification. Therefore, once Coinbase's proportion in the ARKF fund fluctuates significantly, Ark will often rebalance. This means that when Coinbase’s market capitalization rises or falls, Ark may adjust its holdings accordingly.
As of December 18, Coinbase remains the second largest holding of the ARKF ETF, with a weight of 9.9%, second only to Spotify. According to the latest disclosure, ARKF currently holds Coinbase shares with a market value of approximately $110 million. Despite this, the ARKF fund as a whole has performed well this year, up about 54% so far.
The Fed's hawkish comments caused shock
Coinbase's stock price plummeted on Wednesday, just as the Federal Reserve announced a 25 basis point rate cut, and market sentiment shifted. Fed Chairman Powell's speech was clearly hawkish, and he lowered the expectation of rate cuts in 2025 from four to two, which made the market uneasy. BRN analyst Valentin Fournier pointed out in a communication with The Block that although signs of inflation are still obvious, this unexpected policy shift has caused a strong market reaction, especially when investors are full of uncertainty about the Fed's future policy path.
Not only the stock market, but the cryptocurrency market has also been significantly affected. Although Bitcoin briefly rose after the rate cut, the market's sentiment was still affected by Powell's speech. Bitcoin fell from $108,000 to below $100,000 in the short period before the speech. Although the subsequent rebound has eased, this fluctuation still significantly affects the stability of the market. Currently, Bitcoin is trading stably around $102,419.
At the same time, Powell reiterated that the Fed cannot hold Bitcoin without congressional approval, a statement that the market interpreted as a possible hindrance to President Trump's proposed "strategic Bitcoin reserve" plan. Trump and Wyoming Senator Cynthia Loomis' proposal that the U.S. Treasury purchase 1 million Bitcoins over the next five years is contrary to the Fed's position, so Powell's remarks may have further increased investor uncertainty.
Bitcoin ETF inflows remain strong despite volatile market sentiment
Although market sentiment appears to be pessimistic in the short term, the inflow of US spot Bitcoin ETFs remains strong. According to data from The Block, the Bitcoin spot ETF recorded another inflow of $275.3 million on Wednesday, which is the 15th consecutive day of capital inflow for the ETF, with the total amount exceeding $6.7 billion. Similarly, the spot Ethereum ETF also achieved a net inflow of $2.5 million, recording capital inflows for the 18th consecutive day, with a total amount of nearly $2.5 billion.
Meanwhile, the GMCI 30 index, which represents the top 30 cryptocurrencies, fell more than 15% after the Fed’s press conference but later recovered to 200.30, showing the market’s adaptability to short-term volatility.
Market turmoil, long-term outlook remains positive
Fournier said that although the market may face short-term volatility in the near term, especially in anticipation of Trump's upcoming presidency, market uncertainty may increase, but in the long run, the outlook for cryptocurrencies remains positive. With the continued development of digital currencies and blockchain technology, the market potential remains huge, and investors and developers need to find opportunities in volatility.
Want to learn more about the cryptocurrency market trends, investment strategies, and the deep economic impact behind them? Then follow Mr. Qiu, who will take you to explore every corner of the cryptocurrency world! No matter how the market fluctuates, Mr. Qiu can always provide you with the most accurate market analysis to help you stand firm in the ever-changing situation.
