Renowned Wall Street fund manager and CEO of ARK Invest, Cathie Wood, has long been a vocal advocate for cryptocurrencies. However, facing persistent delays in obtaining approval for a Bitcoin ETF in the United States, Wood is now turning her attention to Canada. This strategic shift aims to identify new avenues for investing in digital assets through regulated financial products.
According to a recent filing submitted to the U.S. Securities and Exchange Commission (SEC), ARK Invest has updated the prospectus of its $5.7 billion ARK Next Generation Internet ETF (ticker: ARKW). The revised document now includes provisions for indirect exposure to cryptocurrencies like Bitcoin through "exchange-traded funds registered in Canada." Additionally, the prospectus explicitly lists “Canadian Bitcoin ETFs” as eligible investment vehicles for the fund.
ARKW already maintains some Bitcoin exposure, with approximately 5.5% of its assets invested in the Grayscale Bitcoin Trust (GBTC). This position, valued at over $313 million, is the fund’s second-largest holding. While the $30 billion Grayscale trust has been one of the most accessible ways for U.S. investors to gain Bitcoin exposure through a fund, its structural inefficiencies often cause its market price to deviate significantly from the underlying value of the Bitcoin it holds.
Since the launch of Canada’s first Bitcoin ETF in February, performance figures have varied. As of last Friday, the Grayscale Bitcoin Trust had declined by approximately 20%. In contrast, the Purpose Bitcoin ETF (BTCC) in Canada fell by 9% over the same period. ARKW itself dropped about 6.5% since February but remains up 2.3% year-to-date.
Cathie Wood has consistently expressed strong bullish sentiment toward Bitcoin, frequently highlighting its potential as a hedge against inflation. In a statement from May, she reaffirmed her long-term price target of $500,000 for Bitcoin, which currently trades around $46,000.
This pivot toward Canadian Bitcoin ETFs comes at a time when U.S. regulators continue to postpone decisions on multiple pending applications. The SEC currently has a backlog of more than a dozen Bitcoin ETF proposals. Among them is an application from ARK Invest itself, filed in collaboration with Swiss firm 21Shares AG in June, which outlines plans to launch a Bitcoin ETF in the United States.
Why Canadian Bitcoin ETFs Are Gaining Attention
Canadian regulators have approved several physically-backed Bitcoin ETFs, providing investors with a direct and transparent way to gain exposure to the cryptocurrency. These products trade on major stock exchanges, offer competitive management fees, and are structured to closely track the spot price of Bitcoin.
For U.S.-based asset managers like ARK Invest, these Canadian ETFs present a viable alternative. They operate within a clear regulatory framework, provide daily liquidity, and eliminate the premium or discount issues often associated with closed-end funds like GBTC.
Why Are US Bitcoin ETF Approvals Delayed?
The SEC has historically expressed concerns regarding the cryptocurrency market’s maturity and its susceptibility to fraud and manipulation. Key issues include:
- Market Surveillance: The need for robust monitoring to prevent fraudulent activities.
- Custody Solutions: Ensuring the secure storage of underlying Bitcoin assets.
- Liquidity and Valuation: Concerns about the ability to accurately price the asset and provide liquidity during volatile periods.
These concerns have led the SEC to repeatedly delay decisions on spot Bitcoin ETF applications, opting instead to approve futures-based ETFs, which it believes offer greater investor protection through their derivation from regulated CME Bitcoin futures contracts.
Exploring Alternative Crypto Investment Strategies
For investors and fund managers seeking regulated exposure to digital assets, considering international products is becoming an increasingly common strategy. This involves thorough due diligence on the regulatory environment, fund structure, and custody arrangements of the foreign product.
👉 Explore more strategies for crypto investment
Frequently Asked Questions
What is a Bitcoin ETF?
A Bitcoin ETF is an exchange-traded fund that tracks the price of Bitcoin. It allows investors to gain exposure to Bitcoin's price movements without the need to directly purchase, store, or secure the cryptocurrency themselves. The fund holds the underlying asset (Bitcoin) and issues shares that trade on a traditional stock exchange.
Why is the SEC hesitant to approve a spot Bitcoin ETF in the US?
The SEC's primary hesitancy stems from concerns about market manipulation and fraud in the underlying spot Bitcoin markets. The commission has stated that applicants must demonstrate they have partnered with regulated exchanges that possess comprehensive surveillance-sharing agreements to monitor for fraudulent activities effectively.
What is the difference between the Grayscale Bitcoin Trust (GBTC) and a Bitcoin ETF?
GBTC is a closed-end fund, not an ETF. This means its share supply is fixed, leading to its market price often trading at a significant premium or discount to its Net Asset Value (NAV). A Bitcoin ETF, conversely, is an open-ended fund with a creation/redemption mechanism that helps keep its market price closely aligned with the NAV of the underlying Bitcoin.
How does investing in a Canadian Bitcoin ETF work for a US investor?
U.S. investors can typically purchase shares of Canadian-listed ETFs through most major U.S. brokerage accounts. However, they should be aware of potential currency exchange fees (as they trade in Canadian dollars), different tax implications, and the need to ensure their specific broker allows for trading on Canadian exchanges.
What are the advantages of a Canadian Bitcoin ETF over GBTC?
The main advantages are price accuracy and lower fees. Canadian Bitcoin ETFs are designed to trade very close to the actual spot price of Bitcoin due to their ETF structure. They also generally have lower annual management fees compared to GBTC, making them a more cost-efficient vehicle for long-term exposure.
Besides ETFs and trusts, what are other ways to gain Bitcoin exposure?
Other common methods include purchasing Bitcoin directly on a cryptocurrency exchange, investing in Bitcoin mining companies, or buying shares of companies that hold significant amounts of Bitcoin on their balance sheets. Each method carries its own unique set of risks and operational complexities.