Why is ARK Investment investing in Crypto ETFs?

Highlights

  • ARK Investment has made changes in its prospectus for its ARK Next-Gen Internet ETF.
  • The fund would invest in the Grayscale Bitcoin Trust or other pooled investment vehicles that invest in bitcoin domiciled & registered for dealing in Canadian Bitcoin ETFs.

ARK Investment has amended its prospectus for its ARK Next-Gen Internet ETF to open the prospect of investment in crypto ETFs in Canada. As per its filing with US SEC, the fund might invest in the Grayscale Bitcoin Trust or other pooled investment vehicles that invest in bitcoin like ETFs registered for dealing in Canadian Bitcoin ETFs.

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What was the pivotal change in the prospectus?

The Company changed the prospectus and Summary Prospectuses for the ARK ETF Trust dated 30 November 2020.

The Principal Investment Strategies section of the Prospectus and Summary Prospectus for the fund is deleted and replaced by the funds with exposure to cryptocurrency like Bitcoin indirectly via an investment in a grantor trust or other pooled investment vehicles ETFs domiciled in Canada.

However, the market price of bitcoin remains subjected to excessive variations. Hence, the prospectus highlighted that if the cryptocurrency market continues to be volatile, then there are chances that investors might experience losses if the value of the fund’s investments in GBTC or Canadian Bitcoin ETFs decline.

Image Information: Weak YTD Performance of  Grayscale Bitcoin Trust

Why could be the possible reason to amend the prospectus?

ARK investment holds more than 8.5 million shares of Grayscale Bitcoin Trust, through its ARKW ETF. It is the second-largest holding in the fund. Last month, a crypto analyst at ARK highlighted that the overall cryptocurrency exchange trading volume is about to reach US$16 trillion. However, the YTD performance of Grayscale Bitcoin Trust, demonstrated a slip from US$25.5 to US$5.79 as on 13 September 2021.

As per industry experts, when Grayscale Bitcoin was compared with Canadian ETF in terms of their YTD performance, a huge gap got reflected between Grayscale Bitcoin (GTBC) and Canadian ETF.

Earlier this year, ARK investment’s CEO, Cathie Wood, created a BTC ETF in partnership with 21Shares, that would track BTC performance.

Ms Wood also highlighted that in future, she expects bitcoin as a part of balanced investment portfolio.

As per company’s website, since the emergence of Bitcoin, the Company has witnessed a rise of a global battle among monetary systems. The Company believes that cryptocurrencies controlled by neutral, open-source networks can win the battle. By unlocking a new system to store and transfer value, cryptocurrencies can create an open base of robust assurances in wealth and monetary integrity.     

ARKW also holds shares of Coinbase, a US-based cryptocurrency exchange.

Bottom Line

The Canadian market has approved multiple cryptocurrency ETFs in 2021, demonstrating an affinity towards digital currency. Furthermore, based on the YTD performance of GTBC and Canadian ETF, one can say that ARK’s decision to amend the performance seems logical. However, it is also true that cryptocurrencies are highly volatile, and it would be interesting to watch how would the Canadian ETF perform in the coming days.

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