After a big pump of 750%, "Cathie Wood" reduced position. "The first stablecoin stock" Circle finally experienced a big dump.

"Sister Wood" reduces Circle holdings, cashing out over 300 million dollars.

According to media reports on Wednesday, renowned investor "Cathie Wood" of ARK Investment Management has sold approximately 1.5 million shares of Circle stock in the past four trading days, worth about $333 million.

Analysts generally believe that this is a normal operation of profit-taking by Ark Invest.

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

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

On the first day of Circle's listing, Ark Invest made a significant purchase of 4.5 million shares, with a holding value of approximately $373 million. With the substantial rise in Circle's stock price, Ark Invest 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 Invest Reduces Holdings After Significant Profits

According to media calculations, the three ETFs managed by Ark Investment have collectively reduced their holdings by about 1.5 million shares of Circle stock.

Among them, the flagship product ARK Innovation ETF (ARKK) sold 1.2 million shares, with total assets reaching $6.5 billion. The ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF) also followed with reductions.

However, ARK is still the eighth largest shareholder of Circle.

Bloomberg Intelligence ETF analyst Athanasios Psarofagis stated:

"It is not uncommon for Ark to sell when the stock price rises, as they doubled their investment in less than a month."

Strategas Research Senior ETF Analyst Todd Sohn pointed out:

"Taking profits is a natural part of the Ark strategy. The more important question is that if they completely liquidate, it will trigger the risk of a repeat of Nvidia."

In 2023, Wood sold all of her shares in Nvidia when the stock price soared, a move that drew market attention.

The prospects of stablecoin payments are being questioned, with high valuations raising concerns.

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 listing case for a cryptocurrency-related company since Coinbase's direct listing in 2021.

However, analysts have differing opinions on the continued upside potential of Circle. 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 United States. The current card payment system is convenient, secure, and offers generous rewards, while stablecoins may lead to a poor consumer experience and lack new discount or reward mechanisms."

He added that the appeal of stablecoins to American consumers may be limited to serving as a gateway for entering and exiting cryptocurrency transactions.

Michael Lebowitz, the portfolio manager at RIA Advisors, also stated that stablecoins are more like providing services similar to money market funds for cryptocurrency traders, rather than being true alternatives like Visa or Mastercard.

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

At the same time, the significant rise in Circle's stock price has also boosted its valuation level, with a price-to-earnings ratio approaching 180 times, far higher than the forward price-to-earnings ratio of about 22 times for the S&P 500 index.

Miguel Armaza, founding partner of Gilgamesh Ventures, believes that Circle's high price-to-earnings ratio can only be sustained if the company significantly improves its net profit margin and profitability.

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

In addition, data shows that Circle's freely circulating shares account for only 25%, while the average proportion of S&P 500 index constituent stocks is 95%. A low circulation means that stock prices are prone to severe fluctuations; once market sentiment reverses, it may exert downward pressure on stock prices.