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  • Writer's pictureDavid Manion

ARK ETF replaces Grayscale with ProShares in its Bitcoin portfolio. What's the new strategy?

Cathie Wood's ARK Next Generation Internet exchange-traded fund (ETF) has recently made significant changes to its Bitcoin (BTC)-related holdings. As BTC concludes the year with a notable 156% surge, the ETF has sold all of its remaining 2.25 million shares of the Grayscale Bitcoin Trust (GBTC) and acquired 4.32 million shares of the ProShares Bitcoin Strategy ETF, according to a Bloomberg report. ARK ETF replaces Grayscale with ProShares in its Bitcoin portfolio. What's the new strategy?

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Caution As Reason For Exiting Grayscale Bitcoin Trust

Wood sold the Grayscale Bitcoin Trust due to caution about the trust's conversion to a spot Bitcoin ETF and concerns about regulatory approval. The substantial reduction in the trust's discount to its net asset value, combined with its price increase, influenced the decision. Wood expressed optimism about Bitcoin while acknowledging regulatory uncertainty.

Approximately $100 million of the proceeds were used to purchase the ProShares Bitcoin Strategy ETF (BITO) as a transition vehicle to maintain exposure to Bitcoin while gradually transitioning into either ARKW or ARKB, according to Bloomberg ETF expert Erich Balchunas.

ARK has recently become the second-largest holder of BITO, although Balchunas clarifies that this is a temporary arrangement. Balchunas emphasizes that institutions, including ARK, often use highly liquid ETFs for transitions like this.

Balchunas also notes that this move is in line with a prediction made by Bloomberg a month ago, showing strategic foresight on ARK’s part.

According to Balchunas, this decision is advantageous as it allows ARK to increase its own ETF’s assets under management (AUM) while avoiding a significant expense ratio for investors.

Wood’s Long-Term Vision

The Grayscale Bitcoin Trust holdings reduction has been a gradual process for Cathie Wood, despite the surge in Bitcoin price to its highest level since April 2022, as reported. Bitcoin's value more than doubled in 2023, with significant gains towards the end of the year amid speculation about the approval of spot Bitcoin ETFs by the Securities and Exchange Commission (SEC) in January 2024.

During the Sohn Australia conference last month, Wood highlighted the Grayscale Bitcoin Trust as her top pick. However, recent developments have resulted in a shift in the ETF’s portfolio composition. Additionally, the ARK ETF purchased 20,000 shares of the ARK 21Shares Active Bitcoin Futures Strategy ETF and sold 148,885 shares of the cryptocurrency exchange Coinbase Global, according to the fund’s report.

The ARK Next Generation Internet ETF has achieved an impressive 103% gain for the year, surpassing the 55% advance of the Nasdaq 100 Index. It is important to note that the fund’s performance has been characterized by significant volatility, experiencing declines of 19% and 67% in 2021 and 2022, respectively.

The leading cryptocurrency in the market is trading at $42,800, exhibiting a sideways price movement over the past 24 hours. During this timeframe, there has been a marginal decrease of 0.3% in its value.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.


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