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ARK Invest Sells GBTC For BITO

ARK Invest Sells GBTC For BITO

Dec 28, 2023

ARK Invest Sells GBTC For BITO

Cathie Wood joined Bloomberg TV to discuss the decision ARK Invest has made a to pivot away from GBTC, and toward the ProShares Bitcoin Strategy ETF (BITO). This move reflects a broader narrative of caution and adaptability in the face of a dynamic regulatory environment as spot Bitcoin ETF approval approaches.

The GBTC Discount Dilemma

GBTC has long been a staple for investors looking to gain exposure to Bitcoin without holding the asset directly. However, the trust faced a steep discount to its net asset value (NAV), which at one point reached a staggering 50% amid the turmoil in the crypto market. This discount represented a significant divergence between the value of the underlying Bitcoin held by the trust and the market price of GBTC shares.

ARK's Shift to BITO

ARKW, ARK Invest's Next Generation Internet ETF, completely liquidated its position in GBTC, transitioning to BITO—a fund that tracks Bitcoin futures rather than holding the cryptocurrency outright. There are a few reasons this shift made sense for ARK:

  1. Regulatory Approval: BITO has already received regulatory approval, eliminating the uncertainty that GBTC and similar products face.
  2. Tactical Exposure: BITO offers a way to maintain exposure to Bitcoin during periods of regulatory and tax ambiguity without committing to the direct holding of the asset.
  3. Narrowing Discount: The GBTC discount to NAV has significantly narrowed, allowing ARK to realize gains not only from Bitcoin's price appreciation but also from the discount's closure.

The Search for the First Spot Bitcoin ETF

ARK Invest is eyeing January 8th to 10th as a potential watershed moment for the cryptocurrency investment community. This date range is speculated to be when the first spot Bitcoin ETF could receive approval from the SEC. The SEC's increased engagement with filers, including ARK, is a positive sign, with the regulator asking more technical, due-diligence questions indicative of serious consideration.

ARK's Performance Amid Macro Shifts

Despite a rough patch from February 2021 through December 2022, ARK's innovation-focused funds have rebounded, thanks in part to changing expectations around interest rates. ARK's belief in a looming deflationary environment could benefit their funds, as many of their portfolio companies thrive on deflation fueled by technological innovation.

Flows and Fundamentals

While 2021 and 2022 saw impressive inflows for ARK, 2023 has been a year of outflows, albeit modest in comparison to previous inflows. ARK attributes some of this activity to year-end tax management by investors. However, with performance picking up, the trend of outflows appears to be stabilizing.

The Importance of Private Market Valuations

ARK also keeps a keen eye on private market valuations, noting that these markets have historically lagged behind public markets in adjusting to innovation-led revaluations. With public markets having made considerable gains recently, ARK sees the private markets as ripe with opportunity for future growth.

Leadership and Vision

ARK Invest's founder, Cathie Wood, underscores the importance of visionary leadership in the companies they invest in, likening Elon Musk's impact to historical figures like Thomas Edison. ARK evaluates companies based on metrics that include management quality, moat, execution, and product leadership, among others.

The Future of ARK's Offerings

With a focus on innovation and disruption, ARK continues to explore new opportunities. The acquisition of a London-based company hints at potential new funds and investment products that may become available to investors seeking exposure to cutting-edge technological advancements.


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