A Bitcoin exchange-traded fund isn’t yet off the ground, but ARK CEO Cathie Wood is already thinking about other crypto ETFs to launch.
Wood’s ARK Investment Management and Swiss fintech 21Shares are moving together to launch an exchange-traded fund that would hold Ether, the second-largest digital token behind Bitcoin. The companies moved forward with an application with the Securities and Exchange Commission late Wednesday.
“It is our mission to increase access and exposure to crypto-backed assets, beyond bitcoin,” said Wood and 21Shares CEO Hany Rashwan in a joint statement.
“As the regulatory environment changes, we are committed to innovating, developing and launching products providing efficient and regulated ways to access ether in the market,” they added.
VanEck also wants to launch an
Ether ETF.
The investment manager filed its registration statement for such a fund in May 2021, but didn’t move for the rule change required to list the fund on an exchange until Wednesday.
The applications come soon after Grayscale Investments successfully appealed an SEC decision that denied its bid to launch the first spot Bitcoin ETFs in the U.S. A panel of federal judges determined that the commission had acted arbitrarily and capriciously in denying Grayscale’s request when it had already approved ETFs that hold Bitcoin futures, such as ProShares Bitcoin Strategy (ticker: BITO). The SEC has until the middle of October to decide whether it will challenge the ruling, though it can also try to find other grounds for bringing the ETF to market.
In August, several fund companies also applied to launch funds that would hold Ether futures, which could be approved as soon as October.
Those applications caused the price of Ether to spike by more than 10%. After ARK Invest-21Shares and VanEck filings, the price of the token has been basically flat at $1,630.
The blitz of crypto ETF applications is creating optimism that financial advisors and other institutional investors will soon be able to easily buy tokens in a wrapper that they’re familiar with. But there’s reason to be skeptical that potential fund approvals will necessarily cause the price of the token to rise.
For one, advisors have had plenty of crypto options to offer their clients but have shied away—for the most part.
Bitcoin futures funds quickly accumulated assets, but they have stagnated at around $1 billion under management.
The
Grayscale Bitcoin Trust
has been more successful, with about $16 billion under management. That fund, which Grayscale wants to convert to an ETF, has traded at about a 20% discount to the value of its underlying assets, and at least some of its holders might sell and move into Bitcoin directly or to other products if the discount is erased.
Funds that hold Ether, which has market value of $196 billion, will likely hold fewer assets. The
Grayscale Ethereum Trust
(ETHE), which similar to its Bitcoin counterpart trades at a 30% discount to Ether, has about $4.9 billion under management.
The SEC has the option to delay a final decision on the Ether fund applications a few times, with the drop-dead deadline most likely falling in May of next year.
The commission declined to comment.
Whether the funds can come to market even by then depends on whether the agency chooses to keep fighting the launch of Bitcoin ETFs. That will become clear to investors in the next month.
Write to Joe Light at [email protected]
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