Bitcoin is higher by 2.6% over the past week, a modest rally by the standards of the largest cryptocurrency, but one that could pave the way for more upside following a recent decline.
That pop by bitcoin is still young, but it’s helping some crypto-correlated equities, including Coinbase (NASDAQ:COIN). Should that scenario persist, it could positively impact exchange traded funds, namely the ARK Fintech Innovation ETF (NYSEARCA: ARKF).
Shares of Coinbase, the largest regulated crypto exchange operator, closed at $319.39 on Monday, above the psychologically important $300 level.
“The $300 level seems to have contained Coinbase Global stock’s recent pullback, which came after the equity’s rally was rejected by the $370 level earlier this month. The 40-day moving average is also providing a floor for the shares today, after COIN slipped below it for the first time since October on Friday. Quarter-to-date, the security remains up 39.2%,” according to Schaeffer’s Investment Research.
The health of Coinbase shares is relevant to ARKF because the actively managed ETF allocates 8.6% of its weight to that stock. Not only does that make Coinbase ARKF’s second-largest holding, it also makes the ARK Investment Management fund one of the largest ETF owners of Coinbase shares.
If Wall Street analysts are correct, there could be much more upside ahead for the crypto exchange operator.
“Analysts are optimistic towards the equity, with 12 of the 18 in question sporting a ‘buy’ or better, while six say ‘hold’ or worse. Plus, the 12-month consensus target price of $408.70 is a 30.9% premium to current levels,” adds Schaeffer’s.
One thing is clear: Coinbase is correlated to bitcoin’s price action. While roughly 100 digital assets can be traded on the platform, bitcoin is the dominant cryptocurrency, meaning that its impact on exchange operators runs deep.
On a related note, some other ARKF holdings can be deemed crypto-correlated, too, including Square (NYSE:SQ) and Silvergate Capital (NYSE:SI). Both members of that pair are in ARKF’s top 10 holdings, they combine for 13.24% of the fund’s roster, and Square is the largest ARKF component at 10.06%.
Other ARKF components that could be considered crypto-correlated or may get there over time include Robinhood (NASDAQ:HOOD) and PayPal (NASDAQ:PYPL), among others. Bottom line: Investors looking to make bets on crypto without direct ownership of those assets can do so with some equities, and they’ve go an ally in ARKF.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.