ARK Innovation Fund Bets Big on Bitcoin—Will It Pay Off?

Key Points

• ARK Innovation Fund just bought a multi-million stake in Bitcoin and another Bitcoin-related name; investors could pick up on this reasoning.
• This fund sees the broader market as a risk-on cycle, aligning with Wall Street analyst opinions on these names.
• A worthy mention exposed to Bitcoin gives a chance for over 100% returns.

The United States economy is showing signs of weakness, as seen in slowing inflation from consumers and businesses alike. With lower readings in reports like the CPI and PPI, investors can safely assume that demand is pulling back across the board. This is behind the lower readings in consumer spending and retail sales so far into the first quarter of 2025.

While this is bearish on a fundamental basis, a reaction portrayed in the S&P 500 and its 10% pullback so far into the year, there are other implications that go beyond the current price action.

This is where the opportunity lies for investors looking to align their portfolios with the best odds moving forward. Lower inflation readings in the economy will push the Federal Reserve (the Fed) to consider cutting interest rates earlier than expected.

This scenario is why those from ARK Innovation ETF NYSEARCA: ARKK decided to go on what’s called a “risk-on” path for their holdings by choosing exposure in the areas of the market that tend to do well when rates are lowered.

The exchange-traded fund (ETF) decided to buy up to $80 million worth of Bitcoin as of March 2025, as well as a new stake worth $5.2 million in shares of Coinbase Global Inc. NASDAQ: COIN as a secondary bet on better risk-on performance.

Can The Strategy Pull ARKK Out of Its Funk?

Over the past month, the innovation ETF declined by as much as 26.6% to underperform the S&P 500 and other risk-on asset classes, which might have prompted its managers to rethink their allocation process and strategy in light of today’s economic landscape.

Looking at the iShares Bitcoin Trust NASDAQ: IBIT as a comparison, the Bitcoin tracker was only down by 13% during the same month, but it is actually still up by 22.2% over the past year. This performance shows that the market is not only accepting Bitcoin as a real asset class now but also an opportunity for ARK to improve its outlook by holding it.

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There are signs of approval in the market upon this new strategic shift as well, as investors can note the recent 52.1% boost in holdings for the ARK fund coming from those at Centaurus Financial, bringing them to a net position of $504 thousand as of March 2025.

While not the largest position in the ETF, this new allocation does imply that other institutions see ARK as making the right decisions by investing in a risk-on asset that could potentially do well if the Fed reacts to the slowdowns in economic data in the coming quarters.

Coinbase: More Upside Beyond Bitcoin

More than buying Bitcoin, ARK also made a bet that Coinbase, the middleman in Bitcoin buyers and sellers, will do well in this future scenario. Looking to the way Wall Street analysts feel about Coinbase stock today, investors can also safely assume that ARK made another right call.

With a consensus price target of $316.6, these analysts now forecast that Coinbase stock could rally by as much as 73% from where it trades today. Considering that Coinbase stock has fallen during this S&P 500 pullback, and now trading at a 52% of its 52-week high, investors are facing a fantastic risk-to-reward ratio for the stock here, as most of the downside might already be priced in today.

On a more subtle note, investors can see that the broader market is also looking to a bullish scenario in Coinbase stock, as it is now willing to pay up to 4.5x on a price-to-book (P/B) basis for the company, which is a steep premium to the financial sector’s average 2.7x valuation today.

While some value investors will call this expensive, seasoned professionals will remind them that the market is always willing to overpay for the stocks that it believes can outperform the peer group as well as the broader market in this case.

CleanSpark Stock: Another Worthy Mention

While this company might be a bit from a big fund like ARK to invest between, retail investors have no issues here. Bitcoin miner CleanSpark Inc. NASDAQ: CLSK now trades at 32% of its 52-week high, giving investors an even better ratio on risk-to-reward than Coinbase.

Of course, this trade pays off only if Bitcoin does end up rallying on a Fed reaction. Analysts now see a consensus price target of $21.6 per share today. This view not only calls for the stock to flirt with its 52-week high prices again but also for an implied rally of as much as 171% from where the stock trades today.

This time, investors would also be aligning themselves with other institutions as well, considering that the Vanguard Group has recently built up a stake worth up to $181 million in CleanSpark stock, or 7% ownership in the company as an optimistic bet on Bitcoin.