Author: Chenglin Pua
Last Updated: June 28, 2021
Introduction
In June 2021, ARK Invest, a U.S.-based investment management firm, submitted an application to the U.S. Securities and Exchange Commission (SEC) to launch the ARK 21Shares Bitcoin ETF (ticker: ARKB). This ETF aims to track the S&P Bitcoin Index, reflecting Bitcoin’s market performance.
ARK Invest, founded by Cathie Wood in 2014, manages approximately $52.85 billion in assets (as of July 2021). The firm focuses on disruptive technologies like AI, blockchain, and cryptocurrencies. Notably, ARK’s funds surged by 143% in 2020, earning Cathie Wood the nickname "Money Queen."
What Is a Bitcoin ETF?
An Exchange-Traded Fund (ETF) tracks the performance of specific assets without requiring investors to own them directly. For example:
- A Bitcoin ETF mirrors Bitcoin’s price movements but eliminates the complexities of buying, storing, or securing actual Bitcoin.
- Benefits include lower investment barriers, liquidity, and accessibility for traditional investors.
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Despite growing demand, the SEC has yet to approve any Bitcoin ETF in the U.S., citing concerns over market manipulation.
Canada Approves Three Bitcoin ETFs in One Month
While the U.S. hesitates, Canada has embraced Bitcoin ETFs:
- Purpose Bitcoin ETF (BTCC) – Launched February 2021, achieving $145 million in daily trades.
- Evolve Bitcoin ETF (EBIT) – Approved shortly after, offering USD and CAD options.
- CI Galaxy Bitcoin ETF (BTCX) – Debuted in March 2021, emphasizing security and competitive fees.
Other countries like Brazil and Dubai followed suit, approving their own Bitcoin ETFs to meet investor demand.
Market Demand for Bitcoin Remains Strong
Institutional interest in Bitcoin is soaring:
- Over 1/3 of Goldman Sachs’ surveyed clients hold digital assets, with half planning to expand their portfolios.
- Firms like Bitwise Asset Management see ETFs as a gateway for financial advisors to offer Bitcoin allocations.
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SEC’s Concerns: Market Manipulation
The SEC remains cautious due to:
- Price volatility influenced by figures like Elon Musk (e.g., Tesla’s Bitcoin purchases and reversals).
- Lack of regulatory frameworks for crypto markets.
However, optimism persists with Gary Gensler, a crypto-savvy SEC chair, potentially paving the way for future approvals.
Could a Bitcoin ETF Spark the Next Bull Run?
Historical parallels with gold ETFs suggest potential:
- Gold prices rose 318% after the first gold ETF launched in 2004.
- Bitcoin ETFs could similarly boost liquidity and attract institutional capital.
With the U.S. accounting for 55.9% of global financial markets (Statista), SEC approval could significantly impact Bitcoin’s valuation.
FAQ
1. Why hasn’t the SEC approved a Bitcoin ETF?
The SEC cites risks like market manipulation and insufficient investor protections.
2. Which countries have approved Bitcoin ETFs?
Canada, Brazil, and Dubai lead in regulatory approvals.
3. How does a Bitcoin ETF work?
It tracks Bitcoin’s price without requiring direct ownership, simplifying investment.
4. Could ETFs drive Bitcoin’s price up?
Yes, as seen with gold ETFs, increased accessibility often correlates with price surges.
Disclaimer: This content is for informational purposes only and does not constitute investment advice.
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