A Cathie Wood ETF Just Overhauled Its Bitcoin-Related Holdings

John Cheng and Yueqi Yang, Bloomberg News

Catherine Wood, chief executive officer of ARK Investment Management LLC, speaks during a session at the Web Summit in Lisbon, Portugal, on Wednesday, Nov. 2, 2022. The Web Summit runs from 1-4 November. , Bloomberg

(Bloomberg) -- One of Cathie Wood’s funds has executed a massive shake-up to its Bitcoin-related holdings, selling off its remaining position in the Grayscale Bitcoin Trust because of uncertainty over whether it will be able to successfully convert into an exchange-traded fund.

The ARK Next Generation Internet ETF sold all of its remaining 2.25 million shares of the Grayscale Bitcoin Trust on Wednesday, according to data compiled by Bloomberg. The same day, it bought 4.32 million shares of the ProShares Bitcoin Strategy ETF, which invests in Bitcoin futures, according to the investment firm’s daily data, making it the second-biggest holder of the fund.

The shuffling of holdings comes amid an industry race to get US regulatory approval for the first ETF to invest directly in the biggest cryptocurrency. Wood told Bloomberg Television that the move was made “out of an abundance of caution” in case the Grayscale trust’s conversion to an ETF is not approved by US regulators in early January, which is when many observers expect the Securities and Exchange Commission to green-light the first US spot-Bitcoin ETF.

She also noted that the Grayscale trust’s previous large discount to its net asset value has shrunken considerably, which was “double good news for us” when combined with its price increase.

The SEC faces a Jan. 10 deadline to decide whether to approve a spot Bitcoin ETF application filed by Wood’s ARK Investment Management LLC and 21Shares, and potentially other similar filings. “We think the probabilities have gone up because the SEC has been highly engaged compared to what was happening before,” Wood told Bloomberg TV on Thursday. Nevertheless, she cautioned that an approval is “not 100% certain.”

“We don’t know exactly who’s going to be approved and whether they’ve met all the criteria that the SEC has put before us,” she said. “We’re as optimistic about Bitcoin as we’ve ever been.”

Ark has been trimming its holdings in the Grayscale Bitcoin Trust — which used to be ARK Next Generation Internet ETF’s top holding — in recent months, even as Bitcoin rose to its highest level since April 2022. The cryptocurrency has more than doubled in 2023, with much of the gains coming toward year-end amid speculation that the SEC will finally approve spot Bitcoin ETFs early next month.

Bitcoin fell 2.1% to $42,472.50 as of 5 p.m. in New York, while the Grayscale Bitcoin Trust closed 4% lower.

Earlier this week, Grayscale Investments said Barry Silbert, the founder and chief executive officer of its parent company Digital Currency Group who’s embroiled in legal disputes, has resigned as chairman and will be succeeded by Mark Shifke, the chief financial officer of DCG. The board shakeup was seen by some as a positive step by Grayscale toward getting the SEC’s approval to convert its fund into to a ETF.

Wood touted the Grayscale Bitcoin Trust as her top pick at the Sohn Australia conference last month.

Also Wednesday, the ARK ETF bought 20,000 shares of the ARK 21Shares Active Bitcoin Futures Strategy ETF and sold 148,885 shares of crypto exchange Coinbase Global Inc., according to the fund’s report.

The ARK Next Generation Internet ETF is up 103% for the year, compared with a 55% advance in the Nasdaq 100 Index. However, the fund’s path has been volatile: It fell 67% in 2022.

--With assistance from Denitsa Tsekova, Katie Greifeld and Carol Massar.

(Adds moves in Bitcoin and GBTC in eight paragraph.)