To date, the SEC have accepted, reviewed, and denied a plethora of Bitcoin based ETFs. Despite each of these funds being structured in unique ways, the end result has been the same – market volatility and potential for manipulation remain to large for the SEC to feel comfortable giving a green-light.
This narrative has not dissuaded a growing crop of companies from continuing their onslaught of applications – with some of them being repeats.
Ark Invest + 21Shares
If approved, this Bitcoin ETF would see its common shares traded on the Cboe BZX Exchange, with the goal of tracking the, “performance of bitcoin, as measured by the performance of the S&P Bitcoin Index”.
Notably, this ETF is expected to be a joint venture between Ark Invest and 21Shares. While Ark Invest will leverage its experience as an investment management firm, 21Shares will be expected to, “provide assistance in the marketing of the shares”.
The fund, which promises direct exposure to Bitcoin (not through derivatives), will make use of industry leading custodial solutions provided by Coinbase Custody.
Looking past the details of how the ETF is structured, Ark Invest notes the following as its overall goal.
“…the Shares are designed to provide investors with a cost-effective and convenient way to invest in bitcoin without purchasing holding and trading bitcoin directly.”
No investments are risk free – there are simply varying levels of risk and an investors tolerance for it. In its application, Ark Invest notes the following as a few of the main risk-factors associated with a Bitcoin ETF if approved.
- Nascent spot markets may be more susceptible to lapses in security, and fraud
- Mining activity may sway market prices if newly-mined Bitcoin is dumped/sold
- Decrease in current adoption levels may result in price decline of Bitcoin
- Method of tracking Bitcoin price may prove ineffective
The bottom line is – despite the sky-high potential of Bitcoin, the industry is in its infancy. There are no guarantees that adoption will continue to increase, and that miners will not sway markets.
An Interesting Take
While some believe that higher BTC prices indicate adoption, increasing the likely hood of an eventual ETF, Ark Invest founder, Cathie Wood, believes the opposite may be true. In a recent interview with Bloomberg TV, Wood commented on how the recent downturn within the crypto market will affect the odds of an ETF approval – “The odds are going up now that we have had this correction”
Joining the Ranks
As previously indicated, Ark Invest and 21Shares are simply the latest in a long line of companies looking for the SEC’s approval of a Bitcoin ETF. The following are a few examples of currently active applications submitted to the SEC – each of which are in different stages of assessment.