Why Cathie Wood’s ARK Investments Skipped Buying the First Bitcoin Futures ETF Shares?
Nicholas Otieno Oct 21, 2021 08:35
It was unusual that ARK Investments did not buy ProShares Bitcoin futures shares during the debut trading on the public markets. Wood Cathie, the CEO of the investment firm, has given out reasons behind such moves.
While investors bought huge amounts of the ProShares Bitcoin futures shares during the opening day, famous crypto bull Cathie Wood was not among them.
Speaking at the Milken Institute Global Conference on Tuesday as part of the interview with Bloomberg media, Wood talked about the ETF’s debut and said Ark held off purchasing ProShares Bitcoin Strategy ETF (BITO), citing tax implications.
“No, we did not [invest]. We’re looking at this very carefully […] there are some tax ramifications we’d like to understand more having to do with contango versus more normal backwardation,”
Wood was talking about the structure of the forward curve, whereby contango refers to the case whereby the forward price of a futures contract is higher than the spot price. Backwardation is the opposite when the forward price of the futures contract is lower than the spot price.
Bitcoin futures are often in contango. That is a possible reason institutional investors such as Ark took a wait-and-see approach during the launch day of ProShares Bitcoin futures debut on the New York Stock Exchange market.
Jeffery Halley, a senior market analyst at Oanda, gave some important explanations regarding the impact of contango on futures contracts like the ProShares Bitcoin futures ETF.
“Longer-dated contracts are more expensive than the front month. That means you lose money rolling expiring contracts into the new front month. They probably want to see an orderly roll with decent two-way liquidity and a shallower contango,” he stated in his Wednesday note.
As a result, Halley saw a thin trading volume for ProShares Bitcoin futures ETF from institutional investors like Ark Invest on Tuesday. Such institutions did not actively participate in buying BITO shares.
Overall, Wood still remains confident in Bitcoin since she started investing in the cryptocurrency believing that it could become as huge as the monetary base of the US, which stood at trillions of dollars. Currently, cryptocurrencies have a market valuation of $2.5 trillion, with Bitcoin holding almost half at $1 trillion.
During the interview at the Milken conference, Wood said: “This is the new bank - digital wallet - and it’s going to be true in this country. It’s going to be true around the world.”
Wood’s Investment Strategy
Cathie Wood’s ARK is a heavy bitcoin investor.
As reported by Blockchain.News in June, Ark invest, the investment company run by long-time Bitcoin bull Wood, applied with the US Securities and Exchange Commission for an intent to launch an EFT to track Bitcoin futures, but cautioned that it was not likely to proceed until issues revolving tax liabilities for retail investors are resolved with market regulators.
Wood has been a long-time proponent of cryptocurrency. She has exposure to the ups and downs of cryptocurrencies through the performance of leveraged stocks like Square and Coinbase in her various innovation-focused ETFs.
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