ARK Invest news Archives

Caution As Reason For Exiting Grayscale Bitcoin Trust

According to Bloomberg, Wood cited caution as the reason behind the sale of the Grayscale Bitcoin Trust. The move was prompted by concerns that the anticipated conversion of the trust to a spot Bitcoin ETF might not receive approval from US regulators in early January.

Additionally, Wood highlighted the substantial reduction in the trust’s discount to its net asset value, which, combined with its price increase, influenced the decision.

Wood emphasized the unpredictability surrounding which Bitcoin-related offerings would gain regulatory approval, expressing optimism about Bitcoin while acknowledging the uncertainty ahead.

In this regard, Bloomberg ETF expert Erich Balchunas highlights that approximately $100 million of the proceeds were used to purchase the ProShares Bitcoin Strategy ETF (BITO), likely as a liquid transition vehicle to maintain exposure to Bitcoin while gradually transitioning into either ARKW or ARKB.

Interestingly, ARK has now become the second-largest holder of BITO, although Balchunas clarifies that this is a temporary parking spot. Blachunas emphasizes that institutions, including ARK, often employ highly liquid ETFs for transitions of this nature.

Balchunas also points out that this move aligns with the prediction made by Bloomberg a month ago, reflecting strategic foresight on ARK’s part.

According to Balchunas, this decision is smart as it allows ARK to boost its own ETF’s assets under management (AUM) while saving investors from incurring a significant expense ratio in the process.

Wood’s Long-Term Vision

Per the report, the reduction in holdings of the Grayscale Bitcoin Trust has been a gradual process for Cathie Wood, even as the price of Bitcoin surged to its highest level since April 2022.

Throughout 2023, Bitcoin more than doubled in value, with significant gains occurring towards the end of the year amid speculation that the Securities and Exchange Commission (SEC) would approve spot Bitcoin ETFs in the first days of January 2024.

During the Sohn Australia conference last month, Wood touted the Grayscale Bitcoin Trust as her top pick. However, recent developments have led to a shift in the ETF’s portfolio composition.

In addition to the changes involving Grayscale and ProShares, the ARK ETF also purchased 20,000 shares of the ARK 21Shares Active Bitcoin Futures Strategy ETF and sold 148,885 shares of the cryptocurrency exchange Coinbase Global, according to the fund’s report.

The ARK Next Generation Internet ETF has achieved an impressive 103% gain for the year, surpassing the 55% advance of the Nasdaq 100 Index.

It is worth noting that the fund’s performance has been characterized by significant volatility, experiencing declines of 19% and 67% in 2021 and 2022, respectively.

The leading cryptocurrency in the market is trading at $42,800, exhibiting a sideways price movement over the past 24 hours. During this timeframe, there has been a marginal decrease of 0.3% in its value.

Featured image from Shutterstock, chart from TradingView.com

The US Securities and Exchange Commission (SEC) had on August 11 moved to delay its decision on the ARK 21Shares Spot Bitcoin ETF application. Following this, Cathie Wood’s ARK Invest and 21 Shares has moved to apply for a separate Ethereum futures ETF in what many may consider a double-barreled approach for these firms.

ARK Invest Joins Ethereum Futures ETF Race

According to a filing with the SEC on August 24, ARK Invest and 21 Shares will act as sub-adviser and sub-sub-adviser respectively, on two separate funds that seek to invest in Ethereum futures contracts. These include the ARK 21Shares Active Ethereum Futures ETF on the one hand and Bitcoin and Ethereum futures contracts ARK 21Shares Active Bitcoin Ethereum Strategy ETF on the other hand.

This won’t be the first time ARK Invest and 21 Shares are partnering together to offer an ETF, as they had on different occasions jointly applied to offer a Spot Bitcoin ETF, with the most recent application delayed by the SEC.

If approved, the ARK 21Shares Active Ethereum Futures ETF (with ticker ARKZ) will invest in a “portfolio of ether futures contracts.” This will include futures contracts traded on regulated commodity exchanges like the Chicago Mercantile Exchange (CME).

The fund is focused on futures contracts and would not directly invest in Ether or have any direct exposure to the “spot” Ether. Futures ETFs are known only to track the underlying asset’s performance, while Spot ETFs involve direct investment in the asset.

Furthermore, the document noted that the fund’s remaining assets would be put into short-term cash instruments like US Treasury securities, money market instruments, and repurchase agreements. These investments will serve as a way to shore up the fund’s liquidity and hedge against its investments in Ether futures.

Meanwhile, ARK Invest and 21 Shares are also looking to offer the ARK 21Shares Active Bitcoin Ethereum Strategy ETF (with ticker ARKY). This fund will invest in both Bitcoin and Ethereum futures contracts.

Interestingly, this is similar to what Valkyrie was trying to do when it applied to the SEC to include ETH futures contracts as part of its Valkyrie Bitcoin Strategy ETF (BTF).

According to the filing, there will be an “Active Bitcoin Futures ETF” and “Active Ethereum Futures ETF” known together as the “Underlying ETFs” under the fund. That will suggest that this fund is a two-in-one approach whereby there will be a standalone investment in Bitcoin futures and another for Ethereum futures.

The remaining net assets of the fund will be allocated to cash or cash equivalents with a primary focus on US government securities.

Ethereum price chart from Tradingview.com (Ethereum futures ETF ARK Invest)

Bullish Or Something Else?

Several traditional finance institutions have filed to offer a crypto ETF (both futures and spot). Some of these firms, including ARK Invest and Grayscale, have filed to offer both futures and spot ETFs. As such, it raises questions about whether these firms are truly bullish on the crypto space or whether other factors are involved.

Nate Geraci, the President of ETF Store, pointed out that the total BTC futures ETF market is valued at less than $1.5 billion in Assets Under Management (AuM). So, it might not be profitable, especially for those looking to enter the market.

However, if the market doesn’t provide many profits for these firms, why are they looking to gain crypto exposure at all costs?

Former BitMEX CEO Arthur Hayes, for one, stated that these firms are simply looking to become the “gatekeepers” of crypto in a bid to balance their deposit base. He doesn’t believe that these firms are bullish on the fundamentals of the crypto industry and are simply to make maximum profits when cryptocurrencies disrupt the economy.