In a surprising move, ARK Invest, the institutional asset management firm led by Cathie Wood, has liquidated all of its remaining holdings in the Grayscale Bitcoin Trust (GBTC), amounting to a total of $200 million. This decision comes at a critical time as the Securities and Exchange Commission (SEC) is expected to make a decision on the approval of trading spot Bitcoin ETFs in the United States next month. While ARK Invest has shifted its focus to the ProShares Bitcoin Strategy ETF (BITO) for now, this move is seen as a strategic pause in preparation for the launch of its own spot Bitcoin ETF in the future.
ARK Invest has chosen to allocate half of the proceeds from the liquidation of GBTC to invest in the ProShares Bitcoin Strategy ETF (BITO). This decision is believed to be temporary, allowing ARK Invest to have a more liquidity-rich portfolio. Bloomberg ETF analyst Eric Balchunas suggests that ARK is utilizing the futures Bitcoin ETF as a “temporary parking spot” while it awaits SEC approval for its own spot Bitcoin ETF, which is expected to launch next year.
This shift in investment strategy by ARK Invest follows its gradual divestment from Grayscale holdings, which began back in October when Bitcoin reached $34,000. At that time, the firm sold over 100,000 GBTC shares worth $2.5 million. More recently, on December 19, ARK Invest offloaded an additional 809,441 GBTC shares, amounting to $27.9 million. In addition to exiting GBTC, the firm also divested 148,885 Coinbase shares valued at $27.5 million from its ARK Next Generation Internet ETF (ARKW).
The Broader Context
ARK Invest’s decision to completely dump Grayscale holdings aligns with the growing anticipation and speculation surrounding the potential approval of a spot Bitcoin ETF by the SEC. The firm’s strategic repositioning positions it well in the rapidly evolving cryptocurrency market. Notably, this move has propelled ARK Invest to become the second-largest holder of the ProShares Bitcoin Strategy ETF (BITO). This shift in focus towards ProShares suggests that ARK Invest intends to actively participate in the Bitcoin ETF space, capitalizing on the potential growth and demand for these investment vehicles.
In a related development, Barry Silbert and Mark Murphy resigned from Grayscale Bitcoin Trust’s parent company, Grayscale Investments, in what many interpreted as a display of compliance ahead of the potential approval of a Bitcoin ETF. This move by the former executives coincided with Grayscale Investments amending its S-3 filing for the conversion of GBTC into a spot Bitcoin ETF, adhering to the SEC’s requirement of cash-only creation for the fund redemptions. While Grayscale Trust currently operates as a closed-end fund, the company has been seeking to convert it into an ETF since 2021. Earlier rejections by the SEC were later challenged in court, leading to a reassessment of Grayscale’s application.
If the SEC grants approval for Bitcoin ETFs, Grayscale will find itself facing off against established players such as Fidelity, BlackRock, and ARK Invest. These financial giants possess the scale, resources, and expertise to dominate the Bitcoin ETF space. ARK Invest’s strategic move away from Grayscale and towards ProShares indicates its determination to compete in this emerging market. As the regulatory environment continues to evolve, the race to offer a Bitcoin ETF is intensifying, with several players vying for the first-mover advantage.
ARK Invest’s decision to liquidate its holdings in Grayscale Bitcoin Trust and move to ProShares Bitcoin Strategy ETF marks a significant shift in its investment strategy. The firm is positioning itself for the potential launch of its own spot Bitcoin ETF, pending SEC approval. This move reflects ARK Invest’s proactive approach in navigating the rapidly changing landscape of cryptocurrency investments. While the competition in the Bitcoin ETF space is stiff, ARK Invest aims to establish its presence among the industry heavyweights. Only time will tell if ARK Invest’s bold move will be rewarded in the competitive world of Bitcoin ETFs.