On October 15, ARK Invest and 21 Shares submitted an application to the SEC for a Bitcoin ETF. If approved, this ETF would be the first SEC-approved Bitcoin ETF in the U.S. It would also be the first ETF to be traded on a major exchange.
On Aug. 22, the U.S. Securities and Exchange Commission (SEC) will consider whether to approve a proposed rule change that would allow the exchange-traded fund (ETF) to trade on the New York Stock Exchange (NYSE). The ETF will be the first to track the performance of the price of Bitcoin, the leading cryptocurrency. If approved, the ETF will be known as the Bitcoin Strategy ETF.
It has been a busy week for Bitcoin ETF applications, with the first ETF-like proposal to the SEC from the Winklevoss brothers and the second proposal from the Winklevoss brothers and their ETF-like firm, the ETF application from the fund manager 21st Century Fox (holding company of the Fox Broadcasting Company) and a joint application from ETF manager VanEck and the Canadian blockchain firm Canoe Ventures.
Ark Invest and 21Shares are the latest to file a new bitcoin-based exchange traded fund (ETF) with the US Securities and Exchange Commission (SEC).
To date, the SEC has accepted, reviewed and rejected numerous bitcoin-based ETFs. While each of these funds had a unique structure, the end result was the same: the market volatility and manipulation potential are too great for the SEC to quietly give the green light.
This history has not deterred an increasing number of companies from applying, some of which are repeating themselves.
Ark Invest + 21Shares
If this bitcoin ETF is approved, its common shares will trade on the Cboe BZX exchange to track the performance of bitcoin as measured by the performance of the S&P Bitcoin Index.
This ETF is expected to be a joint venture between Ark Invest and 21Shares. While Ark Invest will contribute its expertise as an investment manager, 21Shares is expected to assist in the marketing of the shares.
The fund, which promises direct exposure to bitcoin (not through derivatives), will use Coinbase Custody’s state-of-the-art custody solutions.
Without going into the details of the ETF structure, Ark Invest notes that the overall objective is as follows.
…Shares is designed to provide investors with a cost-effective and convenient way to invest in bitcoin without buying real estate and trading bitcoins directly.
Identified risks
No investment is without risk – there are simply different levels of risk and the investor’s tolerance for it. In its statement, Ark Invest notes the following key risk factors associated with the bitcoin ETF, if approved.
- Emerging spot markets may be more vulnerable to security breaches and fraud
- Mining activity can affect market prices if newly mined bitcoins are sold at dumped prices.
- A drop in the current level of adoption could lead to a drop in the price of bitcoin.
- Bitcoin price tracking method may not be effective
Therefore, despite the great potential of bitcoin, the sector is still in its infancy. There is no guarantee that adoption will continue to increase or that minors will not affect the markets.
Interesting advice
While some believe the rise in BTC prices indicates that cryptocurrency adoption is increasing the likelihood of ETFs, Katie Wood, founder of Ark Invest, thinks it could be the other way around. In a recent interview with Bloomberg TV, Wood commented on how the recent downturn in the cryptocurrency market will affect the chances of ETF adoption: Now that this correction has taken place, the odds are increasing.
Line up
As mentioned earlier, Ark Invest and 21Shares are just the latest in a long line of companies seeking SEC approval for bitcoin ETFs. The following are some examples of active SEC filings, each at a different stage of evaluation.In addition to filing another Bitcoin-related application, 21 Inc. co-founder Ben Horowitz has teamed up with his old firm, Ark Invest, to submit another ETF proposal to the SEC. This time, the group is hoping to sell a Bitcoin-based ETF that would track an index of the cryptocurrency’s top 100 holdings. If that looks familiar, it’s because the group has tried this same idea twice before and been rejected by the SEC.. Read more about cathie wood ethereum prediction and let us know what you think.
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