Coinbase shorts lose $2.2 billion, Ark Invest continues to buy, is Bitcoin ETF bullish?

According to DLNews, the short sellers of Coinbase have already lost $2.2 billion this year, but their short interest ratio still remains close to 13%, indicating that the interest in short positions remains strong. Coinbase has risen by 135% year to date, and Ark Invest continues to increase its holdings of its stock.

Mizuho Points Out Cost Rate as Potential Risk Amid Intensifying Competition

The U.S. compliant exchange Coinbase released its third-quarter financial report, with cryptocurrency trading volume in the third quarter dropping to $76 billion due to the overall decline in the cryptocurrency market, leading to a decrease in trading-related revenue to $2.9 billion. However, due to proper cost control, the net loss for the quarter narrowed to $2.26 million, and the company stated that it expects to generate meaningful adjusted earnings in 2023!

However, Mizuho, Japan's second-largest financial institution, is not entirely satisfied with Coinbase's performance. According to DLNews, Mizuho analyst Dan Dolev wrote in a report to clients:

Although Coinbase has stopped the losses and exceeded revenue expectations, the company's fundamentals continue to deteriorate.

Mizuho pointed out that its cryptocurrency trading volume hit a new low, third-quarter subscription and service revenue excluding interest income were lower than in the second quarter, and the factor that helped salvage the situation was charging customers higher fees. However, in the long run, this poses a risk as financial giants like BlackRock and Fidelity providing cryptocurrency products to retail consumers intensifies competition and increases costs.

ETFs Will Face Price Competition but Bring More Trading Volume

Bloomberg ETF analyst Eric Balchunas tweeted this summer:

The trading cost of a Bitcoin ETF is 0.01%, which applies to everyone, regardless of scale. Compare this with other cryptocurrency exchanges, and you can see the potential here.

However, Needham analyst John Todaro has a different opinion, believing:

ETF custodial revenue requires a significant amount of assets to generate substantial returns. Most importantly, it brings more trading activity.

Ark Continues to Buy into Coinbase

Ark Invest's largest fund, ARKK, continues to increase its holdings in Coinbase stock with the ticker symbol Coin, making it the second-largest holding in its fund at 9.13%, valued at approximately $610 million.

According to ArkTrace data, just in early November, ARKK purchased 152,577 shares of Coin. Although there were some sales in October, overall, it still shows a pattern of net buying.