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As of the end of last week, the trio of ETFs held around $236 million worth of the stablecoin company.
That move came shortly after a very positive development with Circle's business.
For a company that prides itself on the stablecoin it developed and manages, Circle Internet Group's (NYSE: CRCL) stock has been anything but stable lately. The recent slump in the shares has clearly appealed to the contrarian instincts of top institutional investor Cathie Wood and her Ark Invest team, as they loaded up on Circle shares last week.
These buys totaled $14 million, a considerable sum. Let's take a closer look at this and identify one very attractive quality about Circle stock that's sustaining its bulls.
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Unbroken Circle
Last Tuesday, Ark Invest added to its existing pile of Circle stock with several new buys totaling 220,012 shares, valued at roughly $13.9 million.
These purchases were spread among three Ark exchange-traded funds (ETFs), with the Ark Innovation ETF taking 159,517 shares, the Ark Next Generation ETF gaining 42,400, and the Ark Blockchain & Fintech Innovation ETF absorbing 18,095.
Ark Invest already held Circle positions in the three ETFs. As of market close on Friday, July 17, with the latest additions, these had grown to:
| ETF | CRCL holding size | CRCL weight in portfolio |
|---|---|---|
| Ark Innovation | $154 million | 2.6% |
| Ark Next Generation | $54 million | 3.3% |
| Ark Blockchain & Fintech Innovation | $28 million | 3.2% |
Data source: cathiesark.com.
Wood and her team are placing what some would consider a risky bet with Circle.
The company's stock has been in the doldrums lately for understandable reasons -- cryptocurrencies have fallen out of favor with investors, and that gloomy sentiment has even seeped into stablecoins (like Circle's USDC), which are pegged to fiat currencies.
On top of that, a formidable consortium of large companies, including Visa and -- somewhat oddly, given that it's the primary manager of the Circle Reserve Fund -- BlackRock, is teaming up on a stablecoin called Open USD that will rival USDC. It's slated for official public launch in the fall.
But recently, a development with Circle has made it significantly more competitive.
Trusted by the Feds
Earlier this month, Circle won approval from U.S. federal regulator, the Office of the Comptroller of the Currency (OCC), to establish a national trust bank. For those unfamiliar with banking arcana, a national trust bank is an institution that focuses squarely on managing and safekeeping financial assets.
This could be quite a boon for Circle.
With such an institution under its management, it'll potentially be able to park the sizable U.S. government bond reserve that comprises the Reserve Fund without paying burdensome fees to third parties for the service. And with the OCC as a direct federal regulator of this business, it'll further legitimize stablecoins -- particularly USDC -- as financial instruments
Wood hasn't yet publicly explained her team's rationale for doubling down on Circle, so we can't be sure the charter is a major reason. Either way, it's a strongly favorable development for the company, and it could be a strong driver of its growth in the coming quarters and years.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BlackRock and Visa. The Motley Fool has a disclosure policy.
