Ark Invest holds off from buying Bitcoin (BTC) ETF from ProShares

Thu 21 Oct 2021 ▪ 15h26 ▪ 4 min read — by Rudy Bauer

Ark Invest CEO Catherine Wood said the company hasn’t bought the first Bitcoin ETF from ProShares as it’s still studying it for tax implications.

Tax ramifications in focus

Catherine Wood revealed that she didn’t invest in a Bitcoin futures exchange-traded fund (ETF) from ProShares on the day of its launch but is considering such an investment in the future. At the Milken Institute Conference, she justified her decision by arguing that Ark Invest is examining ETFs in terms of the tax implications associated with projected market dynamics.

“No, we did not [invest]. We’re looking at this very carefully… there are some tax ramifications we’d like to understand more having to do with contango versus more normal backwardation,” Wood said.

Oanda senior analyst Jeffrey Halley believes Catherine Wood was referring to the structure of the forward curve. Contango is a situation where the forward price of a futures contract is higher than the spot price. Backwardation is the reverse process, where the forward price of a futures contract is lower than the spot price. Bitcoin futures are often in contango. This is probably why institutional investors, such as Ark Invest, take a wait-and-see approach.

“Longer-dated contracts are more expensive than the front month. That means you lose money rolling expiring contracts into the new front month. They probably want to see an orderly roll with decent two-way liquidity and a shallower contango,” added Halley.

Hoping to launch their own ETF

Cathie Wood’s Ark Invest teamed up with 21 Shares in June this year to create its own Bitcoin ETF. The company has joined a long list of firms seeking SEC approval. If the regulator’s go-ahead is granted, the Bitcoin ETF offered by ARK Invest will be traded on the CBOE BZX exchange.

“It’s an obvious decision for ARK: they already have half a million in GBTCs – this money can be used for initial funding of the ETF. In addition, Ark has a strong base of young investors who will be interested in the new instrument,” said Eric Balchunas, senior ETF analyst at Bloomberg.

Ark Invest owns 8.3 million shares in Grayscale Bitcoin Trust (GBTC), with BTC and Ethereum (ETH) occupying a significant portion of Ark’s portfolio. In the spring, the asset manager also added Coinbase shares to its three ETFs: Ark Innovation ETF (ARKK), Ark Next Generation Internet ETF (ARKW) and Ark Fintech Innovation ETF (ARKF).

Earlier this week, one of the largest US investment firms, Invesco, decided not to launch their Bitcoin futures exchange-traded fund. The company said it would continue to work in partnership with cryptocurrency bank Galaxy Digital to offer a product line for investors seeking exposure to such assets.

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Rudy Bauer avatar
Rudy Bauer

Photographe, Vidéaste, webdesigner et enfin rédacteur pour CoinTribune: l'image, le digital et la blockchain sont mon dada.


The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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