- Wednesday, October 16, 2024
ARK Investment Management, led by CEO Cathie Wood, is setting its sights on expanding its cryptocurrency exchange-traded fund (ETF) offerings. Teaming up with Swiss fintech company 21Shares, they have jointly submitted an application to the Securities and Exchange Commission (SEC) to launch an ETF specifically tailored to hold Ether, the second-largest digital token.
Not to be outdone, VanEck is also vying to introduce an Ether ETF. While the investment manager initially filed a registration statement for this fund back in May 2021, it wasn't until now that they made a move to obtain the required rule change necessary for the fund's listing on an exchange.
These developments come hot on the heels of Grayscale Investments' recent triumph over an SEC decision that initially thwarted its attempt to pioneer spot Bitcoin ETFs in the United States. A panel of federal judges concluded that the commission's denial of Grayscale's request was arbitrary and capricious, particularly when it had already greenlit ETFs tied to Bitcoin futures, like ProShares Bitcoin Strategy (BITO). The SEC has until mid-October to determine whether it will contest the ruling or search for alternative grounds to bring the ETF to market.
In a separate development, several fund companies applied for approval in August to launch funds centered around Ether futures, with potential clearance as early as October. Unsurprisingly, these applications triggered a more than 10% surge in the price of Ether. Since ARK Invest-21Shares and VanEck entered the fray with their respective filings, however, the token's value has remained relatively stable at $1,630.
The Promise and Skepticism Surrounding Crypto ETFs
The recent surge in crypto ETF applications has sparked optimism among financial advisors and institutional investors. The hope is that these new investment vehicles will allow them to easily purchase digital tokens within a familiar framework. However, it's important to approach these potential fund approvals with a hint of skepticism, as they may not necessarily cause the price of the tokens to rise.
One crucial factor to consider is that advisors have previously had ample crypto options to offer their clients, but have largely refrained from doing so. While Bitcoin futures funds did experience initial success in accumulating assets, they have since reached a plateau at around $1 billion under management.
On the other hand, the Grayscale Bitcoin Trust has fared better, currently managing around $16 billion. This fund, which Grayscale intends to convert into an ETF, has consistently traded at approximately a 20% discount compared to the value of its underlying assets. If this discount is eliminated, some investors may opt to sell and redirect their funds towards Bitcoin directly or explore alternative products.
When it comes to funds holding Ether, the second-largest cryptocurrency with a market value of $196 billion, it's expected that they will likely hold fewer assets. The Grayscale Ethereum Trust (ETHE), similar to its Bitcoin counterpart, currently trades at a 30% discount to Ether, and manages approximately $4.9 billion.
As for the SEC, they have the choice to delay making a final decision on the Ether fund applications multiple times, with the ultimate deadline likely falling in May of next year. It should be noted that the commission has yet to respond to requests for comments regarding this matter.
The much-anticipated launch of Bitcoin ETFs hinges on how the agency chooses to approach this particular investment vehicle. Investors will gain clarity on this issue within the next month.
In conclusion, while the proliferation of crypto ETFs offers exciting possibilities for financial advisors and institutional investors, it's essential to temper enthusiasm with a dose of caution. The successful launch and performance of these funds depend on various factors, including potential regulatory hurdles. As we eagerly await further developments, the crypto investment landscape continues to evolve.
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