On Wednesday, due to the Federal Reserve's more hawkish monetary policy, Coinbase's stock price sharply dropped by 10%. Following this, Cathie Wood's Ark Invest sold 13,780 shares of Coinbase from its fintech innovation ETF (ARKF), amounting to $3.9 million.
This sell-off is Ark's largest stock sale since September 23, with the previous sale involving $2.8 million worth of Coinbase shares. Ark's investment strategy typically aims to avoid any single holding exceeding 10% of the ETF portfolio, which helps ensure fund diversification. Thus, when Coinbase's market value significantly fluctuates, Ark often rebalances its holdings. This means that when Coinbase's market cap rises or falls, Ark may adjust its holdings accordingly.
As of December 18, Coinbase remains the second-largest holding in the ARKF ETF, with a weight of 9.9%, second only to Spotify. According to the latest disclosures, the value of Coinbase shares held by ARKF is approximately $110 million. Nevertheless, the ARKF fund has performed exceptionally well this year, rising about 54% so far.
Federal Reserve's hawkish remarks trigger turbulence
Coinbase's stock price plummeted sharply on Wednesday, coinciding with the Federal Reserve's announcement of a 25 basis point rate cut, leading to a shift in market sentiment. Fed Chairman Powell's tone was clearly hawkish, lowering the expectation of rate cuts in 2025 from four times to two, which unsettled the market. BRN analyst Valentin Fournier pointed out in a communication with The Block that despite clear signs of inflation, this unexpected policy shift caused a strong market reaction, especially amid uncertainty regarding the Fed's future policy direction.
Not only the stock market, but the cryptocurrency market has also been significantly impacted. Although Bitcoin briefly rose after the rate cut, market sentiment remains affected by Powell's speech. Bitcoin fell from $108,000 to below $100,000 in a short time before the speech, and although the subsequent rebound alleviated some concerns, this volatility still significantly impacted market stability. Currently, Bitcoin's trading price stabilizes around $102,419.
Meanwhile, Powell reiterated that the Federal Reserve cannot hold Bitcoin without congressional approval, a statement interpreted by the market as possibly hindering President Trump’s proposed "strategic Bitcoin reserve" plan. The proposal by Trump and Wyoming Senator Cynthia Lummis suggests that the U.S. Treasury purchase 1 million Bitcoins over the next five years, which contradicts the Fed's stance. Therefore, Powell's comments may further increase uncertainty among investors.
Despite market sentiment fluctuations, inflows into Bitcoin ETFs remain strong.
Despite a seemingly pessimistic market sentiment in the short term, inflows into the U.S. spot Bitcoin ETF remain strong. According to data from The Block, the spot Bitcoin ETF recorded an inflow of $275.3 million on Wednesday, marking the 15th consecutive day of inflows, with a total exceeding $6.7 billion. Similarly, the spot Ethereum ETF also achieved a net inflow of $2.5 million, recording inflows for the 18th consecutive day, with a total amount nearing $2.5 billion.
Meanwhile, the GMCI 30 index, representing the top 30 cryptocurrencies, fell over 15% after the Federal Reserve's press conference but then rebounded to 200.30, demonstrating the market's adaptability to short-term fluctuations.
Market turmoil, yet long-term outlook remains optimistic
Fournier noted that while the market may face short-term volatility in the coming days, especially against the backdrop of expectations for Trump’s upcoming presidency, the uncertainty in the market may intensify. However, in the long run, the outlook for cryptocurrencies remains optimistic. With the continuous development of digital currencies and blockchain technology, the market's potential remains vast, and investors and developers need to seek opportunities amidst volatility.
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