ARK Invest’s influential CEO, Cathie Wood, has recently raised the stakes in her commitment to Coinbase Global stock. She’s also unflinchingly upbeat about Bitcoin’s ability to touch the $1 million threshold. Does her perspective mirror the predictions of market gurus?

In a recent conversation with Bloomberg, Wood expounded her investment tactics and insights. She threw light on why Ark Innovation (ARKK), her leading fund, has been amplifying its involvement in Coinbase (COIN) shares. This strategy surfaced after the legal complications that emerged between the Securities and Exchange Commission (SEC) and Binance, a primary rival of Coinbase.

ARKK made a substantial investment of 330,000 shares in COIN on June 6, 2023, which was valued around $17 million at that time, based on disclosure reports. Two other Exchange-Traded Funds (ETFs), Ark Fintech Innovation ETF and Ark Next Generation Internet ETF, have also increased their investments by 35,700 shares (approximately $1.8 million) and 53,900 shares (approximately $2.8 million), respectively.

When combined, all three funds contribute to Ark’s average entry cost which fluctuates between $272.75 and $282.93. Consequently, the firm’s total stake is a whopping $1.77 billion. Given COIN’s present trading value of $53.90, it’s evident that the fund’s trading position is underperforming.

Wood’s bullish outlook appears to stem from her belief that SEC’s regulatory actions will result in Coinbase becoming the predominant player in the US crypto exchange landscape. This prediction, however, depends on Coinbase’s ability to successfully steer its course through its ongoing legal struggles with the SEC.

Wood brings into focus the distinct allegations faced by the two crypto exchanges. Both are implicated by the SEC over claims of trading and staking of unregistered securities. Binance, however, might be on the brink of more severe charges.

In March, the U.S. regulator initiated a civil enforcement action against Binance’s CEO Changpeng Zhao (CZ) and three affiliated entities. They were accused of violating the Commodity Exchange Act and several Commodity Futures Trading Commission rules. Wood reassures that these accusations don’t hold true for Coinbase. This gives her the confidence to predict that Coinbase will weather the storm and emerge victorious, sidelining its main competitor.

The investment world is divided over Wood’s conviction in COIN. Some align with her viewpoint, while others remain skeptical. The stock currently has a ‘Hold’ rating, with an average price target of $58.49, signaling an approximate 12% potential upside.

High-profile analysts, including John Todaro and Atlantic Equities, have proposed more optimistic price targets of $70. Simultaneously, the relative strength index shows a reading of 49.7, indicating a lack of definitive direction for COIN currently.

One crucial question persists: Is COIN destined to become the top or possibly the sole U.S.-based cryptocurrency exchange? And if so, would this inevitably lead to a price boost for COIN?

Investment perspectives grounded solely on the potential downfall of a company’s competitors often overlook other crucial factors. The question arises: Could Coinbase find itself grappling with criminal charges in the future?

It’s important to mention that Coinbase is also battling an SEC lawsuit concerning the trading and staking of unregistered securities. This legal entanglement could potentially cast the exchange as a participant in illicit activities.

More alarming than the SEC lawsuit is the speculation that Coinbase might have made prior investments in projects it intended to list on its exchange before public availability. This rumor began circulating after a discussion between Coinbase CEO Brian Armstrong and The Wall Street Journal on June 10, in which Armstrong failed to provide a clear response when questioned about whether Coinbase invests in tokens listed on its platform.

If it’s indeed true that Coinbase orchestrated a pump-and-dump scheme, the implications could be monumental. But does any concrete evidence support such a severe accusation?

An examination of Coinbase Venture’s portfolio reveals that up to 30 projects listed on the exchange also appeared in the company’s investment portfolio. However, Coinbase Ventures asserts that it operates separately from the primary business and doesn’t collaborate with the review and listings teams.

This doesn’t necessarily incriminate Coinbase in any pump-and-dump scheme, but it could be an additional point of interest for financial regulators. News of such an investigation would likely impact COIN’s share price negatively.

How about Bitcoin reaching $1 million?

In her Bloomberg interview, Wood reiterated her belief that “Bitcoin is an inflation hedge.” However, she also acknowledged the significant risk of deflation moving forward. Despite this, she remains optimistic about Bitcoin, maintaining her $1 million target.

Bitcoin manifested a ‘golden cross’ in February, as the 50-day exponential moving average (EMA) overtook the 200-day EMA. Despite this, declining volumes and the Chaikin money flow indicate potential for sideways trading in the near future.

Even in a deflationary environment, Wood believes Bitcoin could outperform due to its role as “an antidote to counterparty risk in the traditional financial system.” With three of the four largest bank failures in U.S. history occurring in the past three months, her point may hold weight.

Investors are currently in the “accumulation” phase of the cycle as the next Bitcoin halving event, which occurs approximately every four years, is less than a year away. This event reduces the reward for mining Bitcoin blocks and is often associated with price increases.