ETFs Most Exposed To Coinbase’s Crash

May 11, 2022

Coinbase Global Inc.’s stock cratered more than 20% on market open Wednesday after reporting lower-than-expected revenue and revealing a new clause for customer assets in the case of a bankruptcy. 

The cryptocurrency exchange reported earnings of $1.17 billion, missing consensus estimates by $1.48 billion in the first quarter. It also recorded a loss of $1.26 per share against analysts estimating a gain of 91 cents per share. 

Trading volume collapsed from $547 billion in the final quarter of 2021 to $309 billion in the most recent period, likely in part due to a turbulent environment and a risk-off attitude in the markets to begin the year. 

Compounding that miss was Coinbase’s quarterly report adding a new risk suggesting the company may have to treat customer crypto assets as part of its estate in the event of a bankruptcy and would treat its customers as unsecured creditors. 

Unsecured creditors are the last in line to recoup any assets as part of a bankruptcy case. While cash in Coinbase accounts are held in accounts guaranteed up to $250,000 by the Federal Deposit Insurance Corporation, crypto assets in Coinbase accounts or on other exchanges do not have that protection. 

Coinbase CEO Brian Armstrong later said on Twitter the disclosure was part of an SEC mandate for custodians holding crypto assets, but he doesn’t believe a bankruptcy court would consider customer assets as the company’s assets.  

He also said the company is not at risk of bankruptcy. 

Coinbase’s market capitalization now stands at approximately $12.4 billion compared with $65.4 billion upon debuting as a public company last April and its all-time high of $76.36 billion in November 2021. 

ETFs Most Exposed To Coinbase 

Thematic ETFs tracking digital currency adoption have the largest allocations to Coinbase, with the First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT) having a 12.68% allocation in the company. The Global X Blockchain ETF (BKCH) holds an 11.99% allocation and is the only other fund to have a double-digit weight to the stock. 

At a market value level, ARK Invest Management Inc. has the most exposure to Coinbase. Cathie Wood’s firm is the largest institutional owner of the company, with a 4% stake, according FactSet data, and its flagship ARK Innovation ETF (ARKK) held the largest nominal stake of any ETF, with $595.34 million as of close of trading Wednesday. 

Vanguard also holds a combined $309.6 million in the company through four of its ETFs, with the Vanguard Total Stock Market ETF (VTI) accounting for $168.17 million of that total. 

 

ETFs With Largest Allocation To COIN

Ticker  Fund COIN Allocation COIN Market Value
CRPT First Trust SkyBridge Crypto Industry and Digital Economy ETF 12.68% $5.81M
BKCH Global X Blockchain ETF 11.99% $11.13M
FDIG Fidelity Crypto Industry and Digital Payments ETF 9.88% $646.71K
ARKF ARK Fintech Innovation ETF 9.35% $108.63M
BITQ Bitwise Crypto Industry Innovators ETF 8.99% $8.35M
ARKW ARK Next Generation Internet ETF 8.13% $156.68M
GFOF Grayscale Future of Finance ETF 7.23% $834.39K
DAPP VanEck Digital Transformation ETF 7.23% $4.01M
VBB Valkyrie Balance Sheet Opportunities ETF 7.21% $62.34K
BIDS Amplify Digital and Online Trading ETF 6.18% $27.20K

 

ETFs With Largest Market Value Exposure to COIN

Ticker  Fund COIN Allocation COIN Market Value
ARKK ARK Innovation ETF 6.03% $595.34M
VTI Vanguard Total Stock Market ETF 0.06% $168.17M
ARKW ARK Next Generation Internet ETF 8.13% $156.68M
ARKF ARK Fintech Innovation ETF 9.35% $108.63M
VUG Vanguard Growth ETF 0.12% $103.54M
QUAL iShares MSCI USA Quality Factor ETF 0.19% $41.96M
BLOK Amplify Transformational Data Sharing ETF 3.73% $31.38M
FINX Global X FinTech ETF 3.71% $27.66M
MGK Vanguard Mega Cap Growth ETF 0.15% $19.50M
VV Vanguard Large-Cap ETF 0.07% $18.38M

 

Contact Dan Mika at [email protected], and follow him on Twitter

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