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Cathie Wood’s ARK ETF Overhauls Bitcoin Portfolio: ProShares In, Grayscale Out – What’s The Strategy?

In a significant shake-up of its Bitcoin (BTC)-related holdings, Cathie Wood’s ARK Next Generation Internet exchange-traded fund (ETF) has made strategic changes as BTC ends the year with a significant 156% surge.

According to a Bloomberg report, the ETF sold all its remaining 2.25 million shares of the Grayscale Bitcoin Trust (GBTC) while acquiring 4.32 million shares of the ProShares Bitcoin Strategy ETF. 

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.

Bitcoin

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.

Bitcoin

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 

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Ethereum ETFs Face Lackluster Debut From Small Investors: Is The Hype Fizzling Out?

Yesterday’s launch of futures-based Ethereum (ETH) exchange-traded funds (ETFs) delivered underwhelming results, with shallow trading volumes indicating a deficient demand for ETH exposure.

Furthermore, a recent report by The Wall Street Journal report by The Wall Street Journal, it was revealed that the launch of the first Ethereum exchange-traded funds on Monday generated little interest from small investors. 

These ETFs provided individual investors access to the second-largest cryptocurrency through brokerage accounts. However, per the report, most of the futures-based Ether ETFs ended the day in the red, with a combined trading volume of less than $2 million.

Red Flags For Ethereum ETFs?

The Ether ETFs, offered by prominent asset management firms such as ProShares, VanEck, and Bitwise Asset Management, are entering a highly competitive market. Experts believe these funds will have to compete fiercely in cost and marketing strategies to attract investors amidst the crowded landscape.

Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, expressed his concerns regarding the funds, stating: 

A lot of these funds are going to struggle to get assets. There’s probably only room for one stud in this race.

During a Bloomberg TV appearance, Balchunas emphasized the relatively low trading volume of the Ethereum ETFs compared to BITO, a Bitcoin (BTC) ETF that tracks the price of BTC using Bitcoin Futures launched in 2021. 

Notably, the trading environment for the first futures-based Ether ETFs differs significantly from the first futures-based Bitcoin ETFs. ProShares’ initial Bitcoin ETF (BITO) debut, which took place during the peak of the crypto bull market, was one of the most highly traded ETF launches ever. 

Conversely, on the inaugural trading day of Ether future ETFs, the value traded amounted to nearly $1.9 million by noon, with Valkyrie emerging as the frontrunner in the race for Ether futures ETFs. Initially focused on Bitcoin futures and later expanded to include Ether, the fund experienced a 3.9% increase.

VanEck’s EFUT managed to generate some volume by launching ahead of its competitors. However, volumes quickly dwindled, with a staggering 49% of EFUT’s daily volume occurring within its first trading minute. 

Disappointing Launch Day For Futures-Based ETH

Senior analyst of k33 research, Vetle Lunde, suggests that this lackluster launch points to more choppy market conditions ahead. The highly anticipated launch day failed to meet market expectations, reminiscent of the underwhelming debut of Bakkt. 

This sheds light on a seemingly “non-existent” demand for additional crypto exposure, indicating a continuation of the current consolidation range in the market.

In defense of the lackluster ETF launch, it is worth noting that activity in crypto ETFs has been consistently shallow in recent months. BITO, for example, has witnessed consistent outflows since mid-July and experienced its third-lowest average daily volume (ADV) in September 2023, surpassed only by volumes in August and December 2022.

The Ethereum futures products launched on Monday, along with their respective net expense ratios, include:

  • BitWise Ethereum Strategy ETF (AETH) – 0.85%
  • Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) – 0.85%
  • ProShares Ether Strategy ETF (EETH) – 0.95%
  • ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE) – 0.95%
  • Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) – 0.95%
  • VanEck Ethereum Strategy ETF (EFUT) – 0.66%.

Ethereum

The disappointing debut of futures-based ETH ETFs underscores the challenges in generating substantial investor interest in crypto ETFs. As the crypto market continues to evolve, market participants will closely monitor developments and assess the impact on investor sentiment and the future of crypto ETFs.

Featured image from Shutterstock, chart from TradingView.com 

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Bitcoin Spot ETFs: Research Firm Predicts Inflows Over 70,000 BTC, This Price Target

In a recent series of tweets, Vetle Lunde, Senior Analyst at K33 Research, delved deep into the potential ramifications of the US Bitcoin (BTC) spot ETFs. Lunde’s analysis suggests that the broader market might be significantly underestimating the transformative power of these financial instruments.

Lunde’s assertion is rooted in five core reasons. He began with a bold proclamation: “The market is wrong – and dramatically underestimates the impact of US BTC ETFs (and ETH futures-based ETFs).”

Why The Market Is Wrong On Bitcoin

Firstly, Lunde believes that the current climate is ripe for the approval of US spot ETFs, suggesting that the odds have never been more favorable. As NewsBTC reported, Bloomberg experts Eric Balchunas and James Seyffart recently raised their Bitcoin spot ETF approval odds following the Grayscale judgment to 75% this year, 95% by the end of 2024.

Secondly, Lunde pointed out that BTC price has retraced to pre-BlackRock announcement levels. The third reason revolves around the potential competition and the simultaneous launches of multiple US spot ETFs. Lunde anticipates that these, if approved, could lead to robust inflows, potentially surpassing the initial trading days of both BITO and Purpose.

For context, he highlighted that Purpose saw inflows of 11,141 BTC, and in its wake, subsequent ETF launches in Canada resulted in a whopping 58,000 BTC worth of inflows within a mere four months. Given the vastness of the US market compared to Canada, the inflow potential is considerably higher.

The fourth reason Lunde presented is based on historical data from the past four years. He emphasized a noticeable correlation between strong BTC investment vehicle inflows and appreciating BTC prices. This relationship becomes even more pronounced during periods of extreme inflows, which have historically contributed to significant market uplifts.

The last crucial point for Lunde is that on August 17 the market got rid of from excess leverage, as NewsBTC reported.

By The Numbers

In conclusion, the research firm posits that US BTC spot ETFs could see at least 30,000 BTC worth of inflows in their first 10 days. Over a span of four months, the combined inflows into BTC investment vehicles could range between 70,000 to 100,000 BTC, driven by US spot ETFs and growing inflows to ETPs in other countries.

Based on these flow assumptions and data from the past four years, Lunde suggests a potential 66% BTC rally, targeting a price of $42,000. However, he also cautioned that this projection is based on a “naïve assumption” and doesn’t account for other market-moving events.

Bitcoin price prediction

At press time, BTC traded at $25,865.

Bitcoin price

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Bitcoin ETF Inflows Returns After Abysmal Phase

The outflows from bitcoin ETFs in the last couple of months suggested strong bearish sentiment among institutional investors. However, there seemed to be a change in the tide last week when a remarkable inflow trend was recorded over a three-day period. These inflows into the BTC ETFs that provide long exposure showed that investors were expecting further upside for the digital asset, and the decline in short BTC exposure speaks truth to this. 

ProShares Outflows And Inflows

The ProShares Bitcoin ETFs are the most popular in the market. The BITO ETF is one that offers long exposure, while the much newer BITI ETF allows investors to capitalize on short exposure. BITI, being launched in a bear market, grew quickly in terms of BTC exposure. However, the past week has shown a reluctance on the part of investors to bet against the price of bitcoin.

BITI outflows for last Friday came out to a total of 1,060 BTC in a single-day period, the largest outflows the ETF has recorded since it launched. Furthermore, the outflows would continue into the new week, when BITI saw another 425 BTC leave. This brought the total exposure of BITI down to 3,580 BTC as of Monday.

BITO ETF records inflows | Source: Arcane Research

As for the BITO, it has been all shades of good news in the last week. A consecutive three days of inflows saw 1,650 BTC flow into the ETF. This follows a month of outflows for the ETF, showing more demand for long exposure to the digital asset. 

While BITI had seen 1,050 BTC in outflows on Friday, BITO had recorded inflows of 700 BTC on the same day. It suggests that investors are pulling out of their short positions and putting them into long positions.

Bitcoin Not Out Of The Woods

Even though there have been a lot of inflows into long bitcoin ETFs, the numbers still do not suggest a complete shift to the bullish sentiment among investors. BITI’s BTC exposure shows that even though there might be some movement to long ETFs, betting against the price of bitcoin still remains on the minds of investors.

BTC declines to $20,000 | Source: BTCUSD on TradingView.com

BITI’s current total exposure sits at 3,850 BTC, the same as it was back at its June and July peaks. So even though there have been outflows, there is still a strong sentiment to continue to short the digital asset.

BITO had recorded its strongest single-day inflows back on Friday, but it is yet to reverse the bearish trend completely. Even with such high inflows, the ETF is currently sitting at a three-month low. However, a positive from the three-day inflows was a recovery on the CME basis.

Featured image from CryptoPotato, charts from Arcane Research and TradingView.com

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