Ark Invest, the asset management firm founded by cryptocurrency enthusiast Cathie Wood, wants to accelerate its crypto strategy and has now officially lent its name to an ETF tracking bitcoin futures.
A bitcoin future is not the same as a bitcoin token. Whoever holds futures contracts does not actually hold the cryptocurrency but rather rights to a pact between parties to purchase an asset in the future at a price determined in the present.
Ark Invest Believes in a US-Regulated Bitcoin ETF
According to Bloomberg, Ark Invest is joining the race of institutions with applications for a cryptocurrency ETF. The ARK 21Shares Bitcoin Futures Strategy ETF, ticker ARKA, will invest in bitcoin futures rather than the cryptocurrency itself, which could facilitate its approval, given Gary Gensler’s recent words on the matter.
Futures markets tend to be more volatile but have the advantage that participants do not have to safeguard the assets, which is a financial and regulatory advantage as there is greater clarity in the rules because every futures contract is regulated by the CFTC with no doubts at all.
According to the latest filing by Ark Invest, the fund is investing in bitcoin futures ETFs adequately regulated by the United States.
The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing, under normal circumstances, in exchange-traded bitcoin futures contracts that are cash-settled in U.S. dollars and are traded on, or subject to the rules of, commodity exchanges registered with the Commodity Futures Trading Commission (“CFTC”), such as the Chicago Mercantile Exchange (the “CME”) (“Bitcoin Futures”). The Fund does not invest directly in bitcoin or other digital assets.
This is a step forward for the American market, considering that Ark Invest was turning its head to the crypto-friendly Canadian market.
Pushing The Gas On its Crypto Strategy
According to information provided by the SEC, another Ark Invest EFT, the ARK Next Generation Internet ETF (ARKW), is able to in Canadian Crypto ETFs as well as the Grayscale Bitcoin Investment Trust (“GBTC”). The latter, while not an ETF itself, is a U.S.-regulated product that allows indirect exposure to the price of Bitcoin by purchasing shares of a trust that holds large amounts of BTC (approximately 3% of all the coins currently in circulation).
Cryptocurrency is an emerging asset class. There are thousands of cryptocurrencies, the most well-known of which is bitcoin. The fund may have exposure to bitcoin indirectly through an investment in the Bitcoin Investment Trust (“GBTC”), a privately offered, open-end investment vehicle that invests in bitcoin, or other pooled investment vehicles that invest in bitcoin, such as exchange-traded funds that are domiciled and listed for trading in Canada (“Canadian Bitcoin ETFs”).
The fund also has exposure to companies with significant investments in bitcoin or otherwise involved in the cryptocurrency industry. The ETF invests in shares of Coinbase – the first regulated public crypto exchange in the United States, Tesla – a company owned by crypto enthusiast Elon Musk, with 42,000 Bitcoin in its possession – and Square – the crypto-friendly payment processor founded by Bitcoin maximalist and Twitter co-founder Jack Dorsey, which holds more than 8,000 BTC.
These Bitcoin, Ethereum and Solana Price Prediction Charts Are Pure Magic, According to Macro Guru Raoul Pal
Macro guru Raoul Pal says three price prediction charts for Bitcoin, Ethereum and Solana are working like “pure magic.”
In a new Crypto Banter podcast, the co-founder and chief executive officer of Real Vision compares Bitcoin’s current market cycle to that of 2012-13, suggesting a price target of over $250,000 for the end of this bull run.
“I’ve been using this for over a year, and it’s been pure magic…It gives us a pretty clear target, and it’s been magic. It gave me the strength through the bear market to keep adding, thinking ‘we know how this plays out.’”
The former Goldman Sachs executive then pulls up another chart that compares Ethereum’s price trend from 2016 to Bitcoin’s from 2011 to 2019.
“And so here’s Ethereum VS Bitcoin in 2017. It’s been pretty damn good. In fact, I’ve got this as a real-time chart on my Bloomberg and it almost works to the day right now [because] it’s so close.”
Lastly, Pal brings up a chart that shows how smart contract platform Solana (SOL) is following the same path Ethereum did in 2016-2017, which if continued would land SOL above $800 in April 2022.
“The Ethereum price now is pretty exactly in line with the Bitcoin price in 2017. And here’s Solana at the price as ETH, growing faster as a network, but the chart is identical again. It’s crazy.”
Barry Silbert on Converting GBTC Into ETF: “Stay Tuned”
Digital Currency Group CEO Barry Silbert has started teasing Grayscale’s ETF push
Barry Silbert, CEO of Digital Currency Group, urged his followers to “stay tuned” in response to a tweet about potentially converting its Grayscale Bitcoin Trust into a physically-backed exchange-traded fund.
stay tuned— Barry Silbert (@BarrySilbert) October 17, 2021
ProShares’s Bitcoin futures ETF is set to start trading on Monday after it was greenlit by the U.S. Securities and Exchange Commission earlier this week.
However, the regulator has so far shot down all the proposals to launch an ETF that will not track the price of Bitcoin directly due to concerns about investor protection. Instead, investors will have exposure to the Chicago Mercantile Exchange’s futures contracts.
Joe Orsini, director of research at Eaglebrook Advisors, has outlined some risks associated with a futures-based ETF in his recent thread, claiming that it will be applicable for intra-day trading instead of long-term investing.
Futures-based #bitcoin ETFs? Buyer Beware.
A thread on contango, using USO ETF (a futures-based ETF on crude oil) to compare performance of Spot WTI Crude, 1st-month Crude Futures, and a futures-based ETF.
1/n pic.twitter.com/04Rv1m7NKB— Joe Orsini, CFA (@JoeOrsini_) October 15, 2021
Last month, Grayscale CEO Michael Sonnenshein opined that approving a futures-based ETF before a spot-based one would be a “short-sighted” decision.
According to a Thursday report by CNBC, the company is very close to filing with the SEC in order to convert GBTC into a spot-based ETF.
As reported by U.Today, Grayscale hired ex-Alerian CEO David LaValle to work on such a plan this September.
The leading cryptocurrency asset manager confirmed that it was intending to convert its Bitcoin trust into an ETF in early April.
Bitcoin ETF Approval is a double Edged Sword in Terms of Price Discovery
Futures based paper products don’t lead to natural price discovery. There’s so much the players can manipulate on these paper products, which will be fixed in a physically-backed ETF.
In response, Caitlin Long expressed: Yep, but physically backed ETFs also foster spot price manipulation. As I’ve said for yrs, Bitcoin ETF approval is a double-edged sword. It brings liquidity, but also brings Wall Street style manipulation and price suppression.
Community response: I don’t see ever any logic here. Crypto is the Wild West, when it comes to manipulation. How does having liquidity in a more regulated market make the manipulation worse?
Crypto markets are way more manipulated than any other asset class. Adding an ETF would only dilute the manipulation.
Supply is real with bitcoin paper copies won’t bring more real supply, but can’t the paper push around the price like in gold and silver? I think they will try but will soon discover that the underlying asset isn’t as elastic as gold and silver with a significantly lower inflation rate and stock flow. Also, gold and silver aren’t 100% auditable by everyone on the planet at all times.
How does a spot ETF foster price manipulation? I don’t really understand the logic here. Most likely, the ETF would simply be buying and storing Bitcoin every single day of its existence.
What do you think the manipulation would look like? With the open source monetary policy and public blockchain ledger, I think any manipulation would have to be very short lived. They can’t create millions of ‘paper’ BTC like the precious metals markets.
Yeah but unlike gold and silver we can completely verify the total supply, and punish manipulation out of these honest markets. If on-chain metrics unanimously say one thing, futures manipulation will be that much easier to rectify, no?
Wall Street can short BTC through the floor. My guess is they want to hammer the BTC price down and drive everyone back to USD. Same way they control all commodities.
ETF is a double edged sword, and anyway there’s a lot of manipulation. So, ETF is nothing significant to care about? If the ETF would hurt bitcoin price more than it would help it, the US would have approved it several years ago.
Hard manipulation like in gold/silver market not possible: Withdraw your BTC from the exchange, as soon as supply dries up the price explodes.
With an BTC ETF, have you removed legal tender? Been thinking on this one and I’m not so sure an BTC ETF is the best thing for BTC in the long run. There is always two sides of a coin.
How can spot price with proof of reserve be manipulated? And how can we move past the financial products created out of thin air, and toward the purpose crypto was created for?
We already have manipulation and suppression in BTC – The Futures-ETF will only serve to deepen that manipulation/suppression. So, Qui Bono? This is not about investors folks!