Ark Invest, 21Shares could jump to bitcoin ETF assets lead: Analysts
If US regulators approve spot bitcoin ETFs, Ark Invest and 21Shares are well-positioned to rapidly accumulate assets, according to Bloomberg Intelligence analysts.
The Grayscale Bitcoin Trust (GBTC) could also have a leg up — if allowed to launch at the same time — given its current asset base of roughly $23 billion assets under management, according to Bloomberg Intelligence’s James Seyffart and Eric Balchunas.
The US Securities and Exchange Commission is set to rule on the Ark 21Shares Bitcoin ETF (ARKB) by Jan. 10, and industry watchers expect the regulator could greenlight a bunch of other similar offerings at that time.
The regulator could also choose to deny these applications.
Segment observers have said a bitcoin ETF, or multiple, could be one of the biggest ETF launches of all-time. A fight for assets between traditional finance giants such as BlackRock, Fidelity and Invesco — not to mention more specialized firms like Grayscale, VanEck, Bitwise and WisdomTree — is set to be fierce.
Flows and volumes are “crucial” to marketing an ETF, Seyffart and Balchunas said in a Wednesday research note. Capital flowing into a fund gives the appearance of success and interest, they added, which can spur other traders and investors to follow.
With that in mind, the analysts argued that Ark Invest might choose to sell its current positions in the Grayscale Bitcoin Trust (GBTC) and port those assets over to ARKB.
The discount to net asset value at which GBTC’s shares trade has recently shrunk to a two-year low, and Grayscale executives have said such a discount would essentially disappear if it is allowed to convert to an ETF.
The Ark Next Generation Internet ETF (ARKW) currently holds nearly 4.3 million shares of GBTC — worth roughly $133 million.
“This influx of flows and volumes might come in chunks, which could even be better for ARKB, since it would help make it look as though the ETF was attracting consistent interest in the first week,” Seyffart and Balchunas wrote.
An Ark Invest spokesperson did not immediately return a request for comment.
The capital injection would be especially important given the size of its largest competitors. While Ark Invest’s US ETFs manage roughly $13 billion in assets, BlackRock ETFs, including those under its iShares brand, hold about 2.4 trillion.
Dave Nadig, financial futurist at data firm VettaFi, previously said capital markets depth and institutional volume would play a key role, noting BlackRock’s institutional relationships could help its bitcoin trust become a quick asset leader.
“[BlackRock and] Fidelity will add their bitcoin ETFs to their modeled/managed funds…possibly immediately to get a head start,” Michael Nasser, co-founder of digital currency brokerage Satstreet, said in an X post.
Agree, this is why they are the favorites! But BlackRock model port only moves into stuff when they have tactical motive, so not guaranteed early
— Eric Balchunas (@EricBalchunas) November 30, 2023
Seyffart and Balchunas added that GBTC will also have an advantage if allowed to convert into an ETF when other firms launch bitcoin ETFs. The trust, which launched in 2013 and has eligible shares trading on OTC Markets Group, is set to become an ETF with regulatory approval, executives have said.
Read more: Grayscale to SEC: Don’t grant ‘prejudicial first-mover advantage’ for bitcoin ETFs
Grayscale Chief Legal Officer Craig Salm noted in an Aug. 31 interview with Bloomberg: ”We’re the only ones with an actual fund today with [assets under management], trading volume and investors.”
The emphasis on marketing is especially pronounced given the rather unprecedented possibility that a bunch of bitcoin ETFs are allowed to launch on the same day.
A dozen fund issuers had filed for spot bitcoin ETFs this year before Switzerland-based Pando Asset entered the race on Wednesday. The asset managers have filed amendments to their applications in recent weeks as they continue to meet with SEC officials.