In the escalating competition among the inaugural issuers of spot-Bitcoin ETFs, Cathie Wood’s Ark Investment Management LLC has taken a strategic move by acquiring shares of its recently launched ARK 21 Shares Bitcoin ETF (ARKB). The ARK Next Generation Internet ETF (ARKW) sold $16 million worth of its position in the ProShares Bitcoin ETF (BITO) to accommodate the purchase, making ARKB constitute 1% of the ARKW fund.
The move comes as a response to the highly competitive environment for spot-Bitcoin exchange-traded funds, with the Securities and Exchange Commission allowing the launch of 10 such ETFs simultaneously last week, preventing any single fund from gaining a first-mover advantage. This scenario has led to a high-stakes race among the funds, all holding the same underlying asset.
Financial analysts note that funneling the firm’s own money into an ETF is a strategic way to rapidly gain scale, a crucial criterion for financial advisers and platforms, many of which have minimum-asset thresholds. Bloomberg Intelligence ETF analyst James Seyffart points out that while Cathie Wood’s move is a unique advantage, other issuers could adopt similar strategies.
Despite some lag in flow data due to ETF accounting, estimates suggest that investors have poured approximately $803 million into spot-Bitcoin ETFs over the last three days. This indicates robust demand for Bitcoin exposure through physically-backed ETFs, beyond potential seed money from issuers.
BlackRock’s iShares Bitcoin Trust (IBIT) has attracted the most cash, with $710 million, followed by Fidelity’s FBTC with roughly $524 million. These inflows have more than offset the outflows from the Grayscale Bitcoin Trust (GBTC) since its conversion into an ETF.
Industry analysts expected around $1.2 billion in outflows from GBTC over the last three trading sessions. The transition of GBTC from a trust structure to an ETF marked one of the first days when all investors could redeem shares near net-asset value.
The debut of spot-Bitcoin ETFs has prompted other firms to explore opportunities in the space. Grayscale and Roundhill have filed applications for Bitcoin covered-call ETFs, and ProShares is intensifying its efforts by filing for leveraged and inverse Bitcoin products, despite uncertainties surrounding Bitcoin-futures ETFs.
With the success of spot-Bitcoin ETFs evident in substantial inflows and trading volumes, industry experts anticipate a proliferation of crypto ETFs employing various strategies, including leveraged, inverse, and options-based approaches. The enthusiasm in the market is expected to drive issuers to introduce an array of ETF offerings to attract investors.
