Why Cathie Wood Is Bullish On Crypto Play Silvergate Despite Recent Slump

Cathie Wood-led Ark Investment Management believes the Silvergate Capital Corp SI stock will benefit from increased crypto adoption and investors likely sold the stock last week to raise funds and buy Coinbase Global Inc COIN on its Nasdaq debut last week.

What Happened: Silvergate shares are down 22% since Wednesday after investors rushed to buy the biggest U.S. cryptocurrency exchange desk Coinbase stock as it began trading on the Nasdaq through a direct listing. 

According to Ark, which has been buying Coinbase shares heavily since its listing, investors potentially took profits to diversify their exposure to crypto in the public markets.

See also: Is Crypto a Good Investment?

"In our view, the Silvergate Exchange Network (SEN), with its strong network effects, positions Silvergate as both a facilitator and a prime beneficiary of increased crypto adoption," the hedge fund said.

The New York-based firm, which holds Silvergate stock via its Ark Fintech Innovation ETF ARKF and the ARK Next Generation Internet ETF ARKW, had sold some of its stake in Silvergate in the runup before Coinbase’s debut.

As of April 19, Ark’s Fintech Innovation ETF holds 1,287,561 shares of Silvergate or about 3.94% of the ETF’s total weight. Its Next Generation Internet ETF holds 581,047 shares or about 1.10% of the ETF’s total eight.

See Also: Cathie Wood Cuts Square Stake And Snaps Up More Coinbase On Day 2

In value terms, the current total stake in Silvergate adds up to about $248.5 million.

Ark Investment firm bought more shares of Coinbase on Friday and as of April 19 holds a total of 12,74,521 shares, or about $435.89 million. It bought the shares via three of its ETFs, namely; the Ark Fintech Innovation ETF, the ARK Next Generation Internet ETF and the Ark Innovation ETF.

See Also: Cathie Wood Trims Tesla Stake And Loads Up Heavily On Coinbase

Silvergate provides financial infrastructure solutions in the cryptocurrency industry and counts Coinbase and Square Inc SQ among clients. 

Price Action: Shares of Silvergate closed 4.38% lower at $$133 on Friday and are up about 78.9% on a year-to-date basis.