Cathie Wood’s Ark Investment has filed an application with the SEC to launch an ETF based on Bitcoin futures.
ARK’s Bitcoin Futures ETF
The fund will be called ARK 21Shares Bitcoin Futures Strategy ETF and the ticker will be ARKA. It is a product where users buy shares. The ETF will be listed on the CBOE.
The fund is fully exposed in bitcoin, and is dedicated to institutional investors.
This is how the operation of the fund is explained in the forms released by the SEC:
“The Fund seeks to invest in Bitcoin Futures so that the Fund’s total economic exposure to bitcoin is approximately 100% of the total assets of the Fund (the “Target Bitcoin Exposure”). That is, the Fund will seek to track the returns of a corresponding investment that held only bitcoins directly. To the extent that the Fund’s economic exposure to bitcoin exceeds 100% of the net assets of the Fund, the Fund will generally have leveraged exposure to the value of bitcoin. This means that any changes in value of bitcoin will generally result in proportionally larger changes in the Fund’s total asset value and net asset value (“NAV”), including the potential for greater losses than if the Fund’s exposure to the value of bitcoin were unleveraged. There can be no assurance that the Fund will be able to achieve or maintain the Target Bitcoin Exposure”.
A high risk instrument
The fund presents itself as a highly risky instrument. Indeed, the note explicitly says that the value of the investment can go as low as zero:
“Bitcoin is a relatively new innovation, as are Bitcoin Futures, and both are subject to unique and substantial risks. In turn, by investing in Bitcoin Futures, the Fund is also subject to unique and substantial risks, including the risk that the value of the Fund’s investments could decline rapidly, including to zero. Bitcoin Futures and bitcoin have historically been more volatile than traditional asset classes. You should be prepared to lose your entire investment”.
Why the SEC might approve Cathie Wood’s Bitcoin ETF
Cathie Wood’s company is not the first to propose this type of product. Mike Novogratz’s Galaxy Digital had also submitted a similar application. The head of the SEC, Gary Gensler, had stated that the SEC would be more inclined to approve not ETFs on Bitcoin, but ETFs based on BTC futures. This is because the SEC cannot regulate Bitcoin, but it can control futures trading and thus provide more protection to investors.
These words have given hope to those who believe that the time has come for the United States to also approve an ETF on Bitcoin. That’s why Ark and Galaxy Digital have decided to be ready with a product that meets Gary Gensler’s requirements.
Buy the rumours
Perhaps it is no coincidence that Bitcoin futures contracts have seen their value soar lately. According to Forbes’ reasoning, this would be due to the impending approval of these futures-based ETFs. This is a decision that the SEC has been putting off for months now, but October could be the month in which the decision is made.
This type of instrument would allow institutional investors to get into Bitcoin without buying BTC directly. When the SEC approves them, many analysts expect the price of BTC to rise sharply, which could be driven by demand growth.