Cathie Wood, CEO of ARK Invest, appears to have taken the investment world by storm. In 2020, Wood’s flagship ARK Innovation ETF (NYSEMKT: ARKK) outperformed the market by nearly 9 times (149 percent versus 16 percent), earning her the title of greatest stock picker from Bloomberg News.
It’s understandable that ARK’s exchange-traded funds would embrace crypto, given the company’s concentration on disruptive technologies, but the level of confidence ARK’s investments have in the sector is still surprising. Last year, Wood set a price estimate of $500,000 per coin for Bitcoin (CRYPTO: BTC), one of Wall Street’s most audacious predictions! Unsurprisingly, ARK is close to launching a Bitcoin-focused exchange-traded fund (ETF).
You don’t have to wait for ARK’s new ETF to get in on the good returns now that the crypto bear market is starting to recover. Here are three growth stocks that Wood owns that are involved in crypto adoption and could profit.
Robinhood: Despite being mocked as a meme stock, it has a promising crypto future
Upstart online brokerage Robinhood Markets has made a splash despite only being on the public markets for a short period. With a poor debut, a tremendous rise that saw share prices more than quadruple in a few trading days, and a correction-level price collapse after the business announced a massive follow-on share offering, the first week saw whiplash-inducing volatility. The software that fueled the meme-stock craze looks to be a meme stock in and of itself.
The phenomenal success of Robinhood among younger traders has contributed to its enviable user growth. Nearly 80% of the company’s user base was under the age of 35, a very desirable demographic for financial services organizations because these individuals had the majority of their earning and investing life ahead of them.
Robinhood’s crypto capabilities, in addition to zero-commission trading, helped the company acquire this demographic. Robinhood is exploding in popularity. The company announced that full-year revenue for 2020 increased by 245 percent to $960 million over the previous year. Cryptocurrency trading accounted for a major amount of that growth. The company followed it up with a huge first quarter, with revenue jumping 309% to $522 million from the previous quarter.
Square is enhancing its flywheel by utilizing Bitcoin
The ARK Innovation ETF has dropped from recent highs, but it can’t be blamed on its Square investment (NYSE: SQ). In the previous year, shares of the digital payments startup have risen over 90%.
Traditional banking has remained averse to bitcoin, creating an opening for financial technology, or fintech, firms. In 2018, Square’s peer-to-peer financial network Cash App included the ability to purchase and sell Bitcoin, demonstrating its commitment to the space. The flywheel effect, in which more services boost user engagement, has been aided by Bitcoin.
However, in the medium term, it may be Square’s other businesses that propel the company forward. COVID-19 destroyed Square’s seller ecosystem last year. Smaller businesses like restaurants, coffee shops, nail salons, and bars, which suffered the brunt of pandemic lockdowns, are big fans of the company’s card readers and POS systems.
Despite this, Square was able to quickly expand its online presence and increase card-not-present purchases for its vendors. Despite severe headwinds, seller gross payment volume (GPV) was steady at year’s end. GPV increased by 86 percent year over year in the most recent quarter, contributing to a total revenue increase of 87 percent (minus Bitcoin).
Coinbase: The company aims to increase institutional Bitcoin use
Coinbase is the most linked to the underlying price of cryptocurrency of the three companies. Coinbase manages a number of crypto-based currency exchanges, therefore it gains indirectly from higher crypto prices by serving as a kind of promotion for new traders. Coinbase employs percentage-based transaction fees, which benefit from increased income per transaction when cryptocurrency prices are higher.
Coinbase recently acquired Bison Trails, now known as Coinbase Cloud. The IaaS platform allows institutions to quickly integrate blockchain infrastructure into their operations. As of the first quarter, more than 8,000 institutions on its platform conducted 64% of their trading volume.