After a surge of 750%, "Cathie Wood" reduced her holdings, and "the first stock of stablecoin" Circle finally plummeted

"Cathie Wood" reduces Circle holdings, cashing out over $300 million.

According to media reports on Wednesday, the well-known investor "Cathie Wood" and her ARK Investment Management sold approximately 1.5 million shares of Circle stock over the past four trading days, valued at about $333 million.

Analysts generally believe that this is a normal operation for ARK to take profits.

Wall Street Insight previously mentioned, for a long time, ARK has been known for its firm bets on cryptocurrencies and disruptive technologies. As one of the most active institutional supporters of Bitcoin, Wood predicted earlier this year that Bitcoin's price could reach $1.5 million by 2030.

As the issuer of the second-largest stablecoin USDC, Circle's stock price has soared from the issue price of $31 to a peak of $263.45 since its listing on June 5, an increase of nearly 750%, with a market capitalization of $50 billion, placing it among heavyweight players like Coinbase and Robinhood.

On the first day of Circle's listing, ARK Investment purchased 4.5 million shares, with a holding value of approximately $373 million. With the significant rise in Circle's stock price, ARK has likely recouped most of its initial investment cost through this reduction.

On Tuesday, Circle's stock price fell by 8.1%, briefly interrupting its upward trend.

ARK Investment reduces holdings significantly after profit-taking

According to media calculations, ARK Investment Management's three ETFs collectively reduced their holdings by approximately 1.5 million shares of Circle stock.

Among them, the flagship product ARK Innovation ETF (ARKK) sold 1.2 million shares, with assets totaling $6.5 billion. ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF) also followed suit in reducing their holdings.

However, currently, ARK remains the eighth-largest shareholder of Circle.

Bloomberg Intelligence ETF analyst Athanasios Psarofagis stated:

"ARK doubled its investment in less than a month, and it is not uncommon for them to sell when the stock price rises."

Strategas Research senior ETF analyst Todd Sohn pointed out:

"Taking profits is a natural part of ARK's strategy. The more important question is if they completely liquidate, it could trigger a repeat of the Nvidia situation." In 2023, Wood liquidated her holdings in NVIDIA when the stock price soared, drawing market attention.

Concerns Over Stablecoin Payment Prospects and High Valuation

Circle's stock price has continued to rise since its listing, closing at a historic high of $263.45 on Monday. This makes Circle the most notable cryptocurrency-related company listing since Coinbase's direct listing in 2021.

However, analysts have differing views on Circle's continued upside potential. Jefferies analyst Trevor Williams stated in a report on Monday:

"We are highly skeptical about whether stablecoins can become a relevant payment method in the U.S. The current card-based payment systems are convenient, secure, and offer generous rewards, while stablecoins may lead to a poor consumer experience and lack new discounts or reward mechanisms."

He added that the appeal of stablecoins to U.S. consumers may be limited to serving as an entry and exit point for cryptocurrency transactions.

Michael Lebowitz, a portfolio manager at RIA Advisors, also noted that stablecoins are more like providing money market fund-like services for cryptocurrency traders rather than being true alternatives to Visa or Mastercard.

He believes that the impact of stablecoins on traditional payment giants may be overestimated.

Meanwhile, the significant rise in Circle's stock price has also pushed its valuation levels, with a price-to-earnings ratio close to 180 times, far exceeding the forward P/E ratio of about 22 times for the S&P 500 index.

Miguel Armaza, founding partner of Gilgamesh Ventures, believes that Circle's high P/E ratio can only be sustained if the company significantly improves its net profit margins and earnings:

"Any execution hurdles, unexpected regulatory setbacks, or macroeconomic headwinds could easily compress the company's valuation multiple, bringing Circle's valuation closer to that of its peers."

Additionally, data shows that only 25% of Circle's shares are freely tradable, while the average for S&P 500 constituents is 95%. A low float means that the stock price is susceptible to significant volatility, and if market sentiment reverses, it could exert downward pressure on the stock price