ARK Invest, the institutional asset management firm led by Cathie Wood, has made a significant move by liquidating all of its remaining holdings in the Grayscale Bitcoin Trust (GBTC), totaling $200 million. This adjustment in the portfolio comes ahead of the anticipated decision by the Securities and Exchange Commission (SEC) next month regarding the approval of trading spot Bitcoin ETFs in the United States.
Strategic Pause and Temporary Parking Spot
Bloomberg ETF analyst Eric Balchunas revealed that ARK Invest used half of the proceeds, approximately $100 million, to invest in the ProShares Bitcoin Strategy ETF (BITO). However, Balchunas speculates that this move is a temporary one, acting as a strategic pause while ARK Invest seeks a more liquidity-rich portfolio. It seems that ARK is utilizing the futures Bitcoin ETF as a “temporary parking spot” while preparing to launch its own spot Bitcoin ETF next year, pending approval from the SEC.
This decision to completely dump Grayscale holdings is a continuation of ARK Invest’s gradual divestment strategy. It started in October when Bitcoin reached $34,000, with the investment firm selling 100,739 GBTC shares worth $2.5 million from its ARK Next Generation Internet ETF (ARKW). In a more recent transaction on December 19, ARK Invest offloaded an additional 809,441 GBTC shares, amounting to $27.9 million. Alongside parting ways with GBTC, ARK Invest also divested 148,885 Coinbase shares valued at $27.5 million from its ARK Next Generation Internet ETF (ARKW).
This strategic repositioning by ARK Invest aligns with the broader context of anticipation and speculation surrounding the potential approval of a spot Bitcoin ETF. If approved, a spot Bitcoin ETF would provide investors with a more direct exposure to the price movements of Bitcoin itself, without the complexities of investing in a trust like GBTC.
ARK Invest’s decision to liquidate its GBTC holdings is a significant move in the crypto investment landscape. As the largest holder of GBTC in its Next Generation Internet ETF, ARK Invest’s exit from this position sends a strong signal to other market participants. It demonstrates the shifting preferences and strategies of institutional investors in the face of upcoming regulatory decisions.
Notably, this move has propelled ARK Invest to become the second-largest holder of the BITO ETF. Should ARK Invest successfully launch its own spot Bitcoin ETF next year, it will be competing against established players such as Fidelity, BlackRock, and Ark Invest. The approval of Bitcoin ETFs opens up new avenues for investors, providing opportunities for diversification and exposure to the booming cryptocurrency market.
During the final week of the year, Barry Silbert and Mark Murphy resigned from Grayscale Bitcoin Trust’s parent company, Grayscale Investments. This move was widely interpreted as a display of compliance ahead of the potential approval of a Bitcoin ETF. In response, the asset manager promptly amended its S-3 filing for the conversion of its GBTC into a spot Bitcoin ETF, complying with the SEC’s demands for cash-only creation for the fund redemptions.
While the Grayscale Trust currently operates as a closed-end fund, the company has been seeking to convert it into an ETF since 2021. Although the SEC initially rejected the application, along with several other proposals for spot offerings from crypto-focused firms, a court determined in September that the SEC had made an error in its denial. This ruling mandated a reassessment of Grayscale’s application and opened the door for a potential conversion to an ETF.
ARK Invest’s liquidation of its GBTC holdings marks a calculated move ahead of the SEC’s decision on Bitcoin ETFs. The strategic pause and temporary parking spot in the ProShares Bitcoin Strategy ETF suggest ARK Invest’s long-term ambitions to launch its own spot Bitcoin ETF. Amidst the anticipation and speculation surrounding the potential approval of Bitcoin ETFs, ARK Invest’s strategic repositioning reflects the evolving landscape of institutional cryptocurrency investments.