The US Securities and Exchange Commission (SEC) had on August 11 moved to delay its decision on the ARK 21Shares Spot Bitcoin ETF application. Following this, Cathie Wood’s ARK Invest and 21 Shares has moved to apply for a separate Ethereum futures ETF in what many may consider a double-barreled approach for these firms.
ARK Invest Joins Ethereum Futures ETF Race
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, on two separate funds that seek to invest in Ethereum futures contracts. These include the ARK 21Shares Active Ethereum Futures ETF on the one hand and Bitcoin and Ethereum futures contracts ARK 21Shares Active Bitcoin Ethereum Strategy ETF on the other hand.
This won’t be the first time ARK Invest and 21 Shares are partnering together to offer an ETF, as they had on different occasions jointly applied to offer a Spot Bitcoin ETF, with the most recent application 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.” This will include futures contracts traded on regulated commodity exchanges like the Chicago Mercantile Exchange (CME).
The fund is focused on futures contracts and would not directly invest in Ether or have any direct exposure to the “spot” Ether. Futures ETFs are known only to track the underlying asset’s performance, while Spot ETFs involve direct investment in the asset.
Furthermore, the document noted that the fund’s remaining assets would be put into short-term cash instruments like US Treasury securities, money market instruments, and repurchase agreements. These investments will serve as a way to shore up the fund’s liquidity and hedge against its investments in Ether futures.
Meanwhile, ARK Invest and 21 Shares are also looking to offer the ARK 21Shares Active Bitcoin Ethereum Strategy ETF (with ticker ARKY). This fund will invest in both Bitcoin and Ethereum futures contracts.
Interestingly, this is similar to what Valkyrie was trying to do when it applied to the SEC to include ETH futures contracts as part of its Valkyrie Bitcoin Strategy ETF (BTF).
According to the filing, there will be an “Active Bitcoin Futures ETF” and “Active Ethereum Futures ETF” known together as the “Underlying ETFs” under the fund. That will suggest that this fund is a two-in-one approach whereby there will be a standalone investment in Bitcoin futures and another for Ethereum futures.
The remaining net assets of the fund will be allocated to cash or cash equivalents with a primary focus on US government securities.
ETH price recovers amid high interest from institutional investors | Source: ETHUSD on Tradingview.com
Bullish Or Something Else?
Several traditional finance institutions have filed to offer a crypto ETF (both futures and spot). Some of these firms, including ARK Invest and Grayscale, have filed to offer both futures and spot ETFs. As such, it raises questions about whether these firms are truly bullish on the crypto space or whether other factors are involved.
Nate Geraci, the President of ETF Store, pointed out that the total BTC futures ETF market is valued at less than $1.5 billion in Assets Under Management (AuM). So, it might not be profitable, especially for those looking to enter the market.
However, if the market doesn’t provide many profits for these firms, why are they looking to gain crypto exposure at all costs?
Former BitMEX CEO Arthur Hayes, for one, stated that these firms are simply looking to become the “gatekeepers” of crypto in a bid to balance their deposit base. He doesn’t believe that these firms are bullish on the fundamentals of the crypto industry and are simply to make maximum profits when cryptocurrencies disrupt the economy.
Featured image from iStock, chart from Tradingview.com