Cathie Wood’s ARK Invest enters Ethereum futures ETF race following delay of spot Bitcoin ETF

Cathie Wood's ARK Invest enters Ethereum futures ETF race following delay of spot Bitcoin ETF

ARK Invest Joins Ethereum Futures ETF Race

The US Securities and Exchange Commission (SEC) recently postponed its decision on the ARK 21Shares Spot Bitcoin ETF application. In response, Cathie Wood’s ARK Invest and 21 Shares have taken a double-barreled approach and applied for a separate Ethereum futures ETF. This move demonstrates their determination to capitalize on the growing interest in cryptocurrencies.

According to a filing with the SEC on August 24, ARK Invest and 21 Shares will act as sub-adviser and sub-sub-adviser respectively for two separate funds. The first fund is the ARK 21Shares Active Ethereum Futures ETF, which focuses on investing in Ethereum futures contracts. The second fund is the ARK 21Shares Active Bitcoin Ethereum Strategy ETF, which invests in both Bitcoin and Ethereum futures contracts. This partnership is not the first time that ARK Invest and 21 Shares have joined forces to offer an ETF. They previously applied jointly for a Spot Bitcoin ETF, which is currently delayed by the SEC.

If approved, the ARK 21Shares Active Ethereum Futures ETF (with ticker ARKZ) will invest in a portfolio of ether futures contracts, including contracts traded on regulated commodity exchanges such as the Chicago Mercantile Exchange (CME). It’s important to note that this fund is specifically focused on futures contracts and will not directly invest in Ether or have any exposure to spot Ether. Futures ETFs only track the performance of the underlying asset, whereas Spot ETFs involve direct investment in the asset itself.

To maintain liquidity and hedge against investments in Ether futures, the fund will allocate the remaining assets to short-term cash instruments such as US Treasury securities, money market instruments, and repurchase agreements.

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Meanwhile, the ARK 21Shares Active Bitcoin Ethereum Strategy ETF (with ticker ARKY) aims to invest in both Bitcoin and Ethereum futures contracts. This strategy is similar to what Valkyrie attempted with its Valkyrie Bitcoin Strategy ETF (BTF), where it included ETH futures contracts as part of its investment approach.

The fund will consist of two Underlying ETFs, namely an “Active Bitcoin Futures ETF” and an “Active Ethereum Futures ETF.” Each ETF provides standalone investments in Bitcoin and Ethereum futures, respectively. The remaining net assets of the fund will be allocated to cash or cash equivalents, with a primary focus on US government securities.

Bullish Or Something Else?

The emergence of multiple traditional finance institutions filing for crypto ETFs, including both futures and spot ETFs, raises questions about their motivations. Are these firms genuinely bullish on the crypto space, or are there other factors at play?

Nate Geraci, President of ETF Store, highlights that the total BTC futures ETF market currently has less than $1.5 billion in Assets Under Management (AuM). This relatively small size may not be as profitable as other markets for firms looking to enter the space.

However, the question remains: if the market may not yield significant profits, why are these firms eager to gain exposure to cryptocurrencies at any cost?

Former BitMEX CEO Arthur Hayes believes that these firms are seeking to become the “gatekeepers” of the crypto industry. By balancing their deposit base, they aim to position themselves to maximize profits when cryptocurrencies disrupt the economy. This perspective suggests that their entry into the crypto space may be driven more by the desire for control and financial gain than by a genuine belief in the fundamental value of cryptocurrencies.

Overall, the involvement of firms like ARK Invest and 21 Shares in the Ethereum futures ETF race signifies increasing interest from institutional investors in the crypto industry. While their motives may be multifaceted, their actions indicate that they acknowledge the potential of cryptocurrencies and are positioning themselves accordingly.

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