ETF Talk: Spotlight on Spot ARK 21Shares Bitcoin ETF

A new trend has swept the market lately: spot bitcoin exchange-traded funds (ETFs)!

On January 10, 2024, the Securities and Exchange Commission (SEC) approved 11 new spot bitcoin ETFs, offering investors a more convenient avenue to invest in the original cryptocurrency. Unlike regular ETFs, spot bitcoin ETFs track Bitcoin’s current price, often referred to as the ‘spot’ price.

Among these newly approved ETFs is the ARK 21Shares Bitcoin ETF (ARKB), which was established on January 10, 2024. Spot bitcoin ETFs present a straightforward method for portfolio diversification by incorporating Bitcoin into investment strategies. Notably, the flexibility of spot bitcoin ETFs allows for the creation or redemption of shares based on market demand.

The approval of spot bitcoin ETFs signifies a notable shift in regulatory treatment towards cryptocurrencies. These ETFs offer investors a regulated means for long-term exposure to bitcoin, with holdings securely stored in cold storage. As discussed in my ETF Talk on March 13, 2024, this vehicle provides regulated exposure to an asset with significant potential.

Furthermore, spot bitcoin ETFs provide investors with the potential to broaden portfolio diversification by incorporating an asset that displays minimal correlation with conventional investments. Notably, ARKB distinguishes itself through its simplicity, providing exposure to Bitcoin without unnecessary intricacies. Investors may find value in this uncomplicated method of accessing the cryptocurrency market.

ARKB tracks the performance of Bitcoin measured by the performance of CME CF Bitcoin Reference Rate, a New York Variant/Index that is adjusted to the Trust’s liabilities and expenses.

ARKB now has an expense ratio of 0.21% and $2,105 million in assets under management (AUM), as of February 29, 2024. Since its inception, the fund’s net asset value (NAV) has increased by 31.64%, with all its assets placed in Bitcoin (BTC).

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Source: StockCharts.com

Before diving into spot Bitcoin ETFs, consider both the pros and cons.

On the bright side, their approval enhances Bitcoin’s legitimacy as an asset class, offering investors access across various accounts, potentially boosting liquidity and stability and featuring lower trading fees compared to some crypto exchanges.

But investors need to be wary, as investing in spot bitcoin ETFs introduces more regulation and reliance on third-party custodians, with potential consequences for both the ETF price and underlying Bitcoin, alongside annual fees and exposure to Bitcoin’s inherent volatility, posing risks for investors unprepared for its fluctuations.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me. You may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.