Ark Invest Dumps $51.7 Million in Circle Shares Amid 400% Stock Rally

Ark Invest, the investment management firm led by Cathie Wood, has sold off over $50 million of its holdings in Circle Internet Group (CRCL), the issuer of the USDC stablecoin. On June 16, Ark dumped 342,658 CRCL shares valued at approximately $51.7 million, based on the day’s closing price of $151.06. The divestment affected three of Ark’s exchange-traded funds (ETFs). According to the firm’s trading file, ARK Innovation ETF (ARKK) offloaded 196,367 shares. Meanwhile, the ARK Next Generation Internet ETF (ARKW) sold 92,310 shares, and the ARK Fintech Innovation ETF (ARKF) parted with 53,981 shares.

Circle’s stock has experienced a notable rally since its initial public offering (IPO) earlier this month. The stock has climbed by nearly 400% to over $150, pushing the company’s valuation around $36 billion. Market observers have linked this surge to Circle’s dominant role in the stablecoin industry. The firm’s USDC stablecoin is the second-largest in the sector with a market capitalization of more than $61 billion. They believe that the Jeremy Allaire-led firm has benefited from increased attention to digital dollar assets amid ongoing efforts to regulate the stablecoin sector in the United States.

However, not everyone is celebrating Circle’s rise. Arthur Hayes, Chief Investment Officer at Maelstrom, has voiced strong concerns about the hype surrounding the firm’s valuation. He stated that Circle is grossly overvalued, but the price will continue levitating. According to him, Circle’s IPO success could trigger a wave of lookalike stablecoin projects with flimsy business models. He said the sector’s current excitement might echo the lead-up to the TerraUSD collapse, especially if US regulation remains light. Hayes noted that future issuers would exploit market momentum and lean on traditional finance credentials to raise funds, even without solid fundamentals. He continued that this avalanche of copycats would eventually populate the bubble and collapse the market. He said that the bubble will pop after the launch of a stablecoin issuer on a public market, most likely in the US, that separates fools from tens of billions of capital by using a combination of financial engineering, leverage, and amazing showmanship.

Summary: Ark Invest, led by Cathie Wood, has sold over $50 million in Circle Internet Group shares amid a 400% rally in the company's stock. The divestment affected three of Ark’s ETFs, with ARK Innovation ETF (ARKK) offloading the most shares. Circle’s stock surge is attributed to its dominant role in the stablecoin industry and increased attention to digital dollar assets. However, Arthur Hayes, Chief Investment Officer at Maelstrom, has raised concerns about Circle’s valuation, warning of a potential bubble in the stablecoin sector.

Analysis: The sale of Circle shares by Ark Invest suggests a strategic move by the firm, possibly due to valuation concerns or a shift in investment strategy. The significant rally in Circle’s stock, driven by its role in the stablecoin industry, has attracted attention and investment. However, the concerns raised by Arthur Hayes highlight the risks associated with the stablecoin sector, particularly the potential for a bubble and market collapse. Investors should be cautious and conduct thorough due diligence before making investment decisions in this volatile sector.