What happened

Coinbase Global (COIN 7.04%) stock was trading higher after it became known that ARK Invest CEO Cathie Wood's ARK Innovation ETF (ARKK 1.43%) had bought more shares of the cryptocurrency trading platform. As of 11:16 a.m. EDT on Friday, the shares were up 3.4%.

Since its direct listing earlier this year, Coinbase shares are down 23%, which correlates with the broader movement in the crypto market.

COIN Chart

COIN data by YCharts

So what

Wood has delivered approximately 46% annualized returns to investors in the Ark Innovation ETF over the last five years, so some investors follow her every move. Coinbase Global fits the high-growth, building-the-future type of company Wood looks for.

This top cryptocurrency stock depends on rising cryptocurrency prices to attract more users to its service, and therefore, drive transaction growth. Because of this dynamic, the stock has traded proportionally with the actual price movements of the cryptocurrency market in recent months. But clearly, Wood's recent purchase signals her view that Coinbase's business isn't done growing.

A one-hundred dollar bill being digitally wiped away.

Image source: Getty Images.

Now what

Coinbase saw its monthly transacting users (MTUs) surge 180% in 2020 to 2.8 million. In the first quarter, MTUs stood at 6.1 million, showing how fast this company is growing. But given the inherent uncertainty in crypto prices, management provided a wide range of potential outcomes for MTUs this year. Guidance calls for MTUs to come in anywhere from 5.5 million to as high as 9 million by the end of 2021. 

In the first-quarter shareholder letter, management acknowledged that competition is increasing, which may make it more difficult to attract users. Other entrants support certain crypto assets that Coinbase doesn't offer, but at the same time, management believes the increased competition is validation of the growth opportunity.