Crypto Quill

ARK Invest, a leading investment firm founded by renowned Bitcoin advocate Cathie Wood, has filed the fifth revision of its Bitcoin exchange-traded fund (ETF) application on December 29, 2023, just hours before the deadline set by the U.S. Securities and Exchange Commission (SEC) for the first wave of potential approvals.

What is a Bitcoin ETF and Why is it Important?

A Bitcoin ETF is a type of investment product that tracks the price of Bitcoin and allows investors to buy and sell shares of the fund on a regulated stock exchange. A Bitcoin ETF would provide several benefits for investors, such as:

• Lower costs: Investors would not have to pay high fees or deal with technical issues associated with buying, storing, and securing Bitcoin directly.
• Higher liquidity: Investors would have access to a large and diverse pool of buyers and sellers, making it easier to enter and exit positions at any time.
• Greater transparency: Investors would be able to see the fund’s holdings, performance, and valuation on a daily basis, as well as the regulatory oversight and compliance of the fund manager.
• Broader adoption: Investors would be able to access Bitcoin through their existing brokerage accounts, retirement plans, and other platforms, increasing the demand and awareness of the cryptocurrency.

What is the Status of Bitcoin ETF Applications in the U.S.?

The SEC has been reviewing several Bitcoin ETF applications since 2021, but has not approved any of them yet. The main reasons for the delay are the concerns over the market manipulation, volatility, custody, and investor protection issues related to Bitcoin and the cryptocurrency industry.

However, the SEC has recently signaled a more positive attitude towards Bitcoin ETFs, as it has approved several Bitcoin futures ETFs in October 2023, which track the price of Bitcoin contracts traded on regulated futures exchanges. The SEC has also indicated that it is more open to considering spot Bitcoin ETFs, which track the price of Bitcoin directly, as long as they meet certain standards and requirements.

The SEC has reportedly set a deadline of December 29, 2023, for the spot Bitcoin ETF applicants to submit their final amendments and revisions, in order to be considered among the first wave of potential approvals. The SEC is expected to make its decisions on these applications by January 11, 2024.

What are the Details of ARK Invest’s Bitcoin ETF Application?

ARK Invest, in collaboration with the European digital asset manager 21Shares, has been pursuing a spot Bitcoin ETF since April 2023. The ETF, named the ARK 21Shares Bitcoin ETF, would trade on the Chicago Board Options Exchange’s BZX Exchange under the ticker symbol ARKB.

The latest update, which is the fifth amendment to the prospectus, includes several changes and additions, such as:

• Risk disclosures: The update adds more details on the risks associated with Bitcoin, such as the environmental impact, the potential changes to the protocol, the competition from other cryptocurrencies, and the regulatory uncertainty.
• Custody arrangements: The update clarifies that the custodian, Coinbase, would hold the Bitcoin backing the ETF in segregated addresses on the Bitcoin blockchain, and would not commingle them with corporate or other customer assets.
• Creation and redemption process: The update explains that the ETF would use a hybrid model of in-kind and cash creations and redemptions, in order to minimize the tax and spread issues for investors.

ARK Invest is one of the most prominent and influential supporters of Bitcoin and the cryptocurrency industry, as it has invested heavily in various companies and projects related to the space, such as Coinbase, Square, Tesla, Grayscale, and others. Cathie Wood, the founder and CEO of ARK Invest, has repeatedly expressed her bullish views on Bitcoin, and has predicted that the cryptocurrency could reach $500,000 in the future.

How is the Market Reacting to the Bitcoin ETF Developments?

The market has been showing a mixed reaction to the Bitcoin ETF developments, as the price of Bitcoin has fluctuated between $40,000 and $50,000 in the past month. Some analysts believe that the approval of Bitcoin futures ETFs has boosted the demand and sentiment for Bitcoin, while others argue that the futures ETFs are not as effective and beneficial as the spot ETFs, and that the market is still waiting for the SEC to approve the latter.

The approval of a spot Bitcoin ETF could have a significant impact on the market, as it could attract more institutional and retail investors, increase the liquidity and transparency of Bitcoin, and enhance the legitimacy and adoption of the cryptocurrency. However, the approval of a spot Bitcoin ETF is not guaranteed, as the SEC still has to weigh the potential benefits and risks of the product, and may impose additional conditions and restrictions on the applicants.