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Cathie Wood is still all-in on bitcoin: Morning Brief

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The monster move downward in Treasury yields yesterday was a giant risk-on signal for markets.

Included in that enthusiasm was the ETF that became synonymous with growthy, disruptive tech during the pandemic: Cathie Wood’s Ark Innovation ETF (ARKK). The ETF jumped 5.2% on Tuesday and is now up over 37% this year, clawing back at least some of a dismal 2021 and 2022 where the fund was one of the hiking Fed’s many victims.

Many tech investors and leaders — including the likes of Elon Musk — have said rates need to stabilize or decline to unlock further gains. Wood seems to be in the same camp, as she told me in a conversation yesterday.

“I don't think the Fed's going any further,” she said. “If the market can feel comfortable that that is indeed the case, we don't have to have rates even come down. We think they will. But we think that our strategy has discounted the worst.”

Meanwhile, the maverick investor isn’t changing her strategy. She’s been remarkably steadfast in her bets and investing philosophy. Even as ARKK plunged 67% last year, she was traveling, speaking to clients and the press as usual. And her message was consistent, even when her returns weren’t: Disruptive innovation is a good investment in the long run.

Has she been proven right? The jury’s still out. Wood says she focuses on a five-year investment horizon. ARKK’s five-year return is -2.5%. Since its inception about nine years ago, it has just about doubled, half the gain in the Nasdaq Composite. Her much smaller Ark Autonomous Tech and Robotics ETF rallied 162% over the same period. (Ark has a suite of eight in-house ETFs).

Wood’s steadfast bet on fintech and crypto, however, is very much on the table. She has been making the rounds in support of a suite of new actively managed digital asset ETFs introduced by Ark in partnership with 21Shares, a creator of crypto exchange-traded products sold overseas.

Wood told me that Ark first bought bitcoin at $250 and her firm’s base case is still $600,000 to $650,000. And she said the odds are improving that the Securities and Exchange Commission will approve Ark and others’ spot bitcoin ETF filings by a January deadline. That, she and other bitcoin bulls believe, could unlock more gains.

This isn’t just a bet on a crypto renaissance and a new product for Wood’s firm. It could also provide the juice the ARKK ETF needs to get out of its current trough, 71% down from its 2021 all-time high. The current largest holding in Wood’s flagship ETF? Coinbase.

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