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Race for first US bitcoin ETF heats-up

By Aaron Woolner


Updated

ARK logo

ARK Investment Management has joined the race to launch a bitcoin exchange traded fund (ETF) in the US by filing a prospectus with the country’s Securities and Exchange Commission (SEC).

ARK, led by famed tech investor Cathie Wood, wants to create the ARK 21Shares bitcoin ETF, in conjunction with Swiss cryptocurrency specialist 21Shares.

ARK’s ETF proposal is the ninth to be submitted to US regulators, according to CNBC and follows recent decisions by the SEC to postpone decisions on whether to greenlight similar proposals by Valkyrie and Wisdom Tree.

European ETFs

An ETF is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. One strength is it offers retail investors access to otherwise difficult to reach assets or regions - such as emerging markets or cryptocurrencies. 

While the US is home to the ETF concept, some European regulators have been more open to the securities than the American authorities. FINMA, the Swiss financial supervisor, allows the product, while the UK’s Financial Conduct Authority does not. 

According to a Bloomberg analysis at the end of 2020, assets with European bitcoin ETFs have topped EUR1bn ($1.2bn). Because of the SEC’s reluctance to license crypto ETFs, US investors can only access the Grayscale Bitcoin Trust (GBTC), which although like an ETF, is not redeemable in the same way and does not track the underlying asset price as well as the European securities.

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Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 22:00 (UTC)
Spread 106.00

Bitcoin volatility 

ARK’s SEC filing says the ETF plans to track the underlying price of Bitcoin, which has been on a rollercoaster ride lately, dropping under $30,000 – less than half its April $63,000 all-time high. 

According to CNBC, ARK’s acknowledges this volatility in its filing, stating: 

“The market value of Bitcoin is not related to any specific company, government or asset. The valuation of Bitcoin depends on future expectations for the value of the Bitcoin network, the number of bitcoin transactions, and the overall usage of Bitcoin as an asset." 

“This means that a significant amount of the value of Bitcoin is speculative, which could lead to increased volatility. Investors could experience significant gains, losses and/or volatility in the Trust’s holdings, depending on the valuation of bitcoin.”

Tesla backer

Wood founded ARK Invest in 2014 and the tech focused fund now has $29bn of under management. A vocal backer of Tesla, Wood’s flagship Ark Innovation Fund has returned nearly 40% annually over the last five years, according to Forbes. 

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Read more: Bitcoin crashes under $30,000

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