Despite SEC Bitcoin ETF Denials, Investors ‘Sort of’ Can Still Buy Shares of Bitcoin ETFs
ETF of the Week: Despite Bitcoin ETF Denial, American Investors Can Still (Sort Of) Buy a Share in a Bitcoin ETF Today
Bitcoin ETF denials have been in the news a lot lately. Earlier this week, the SEC denied 9 separate bitcoin ETFs.
You might assume, naturally, that there’s no way to purchase a bitcoin-related ETF. However, that’s not the case. As pointed out by Lara Crigger at ETF.com in her “ETF of the Week” article, you can purchase a share of one ETF that offers genuine exposure to bitcoin.
“Crypto-enthusiasts are left with few options to obtain bitcoin exposure in a U.S.-based, exchange-traded package,” explains Crigger. “In fact, only one ETF issuer, ARK, allocates to bitcoin in its funds at all.”
Many crypto users will be surprised to learn that they can gain exposure to bitcoin at all by investing in a legal, regulated, US ETF. It’s true: one ETF issuer, ARK, offers exposure to bitcoin.
ARK is best-known for its Bitcoin Investment Trust ETF, or GBTC. This fund functions as a physical trust that owns and stores bitcoin on the behalf of investors. You buy a share of the ETF, and the fund uses that money to purchase bitcoin – similar to how the ETF proposals making their way through the regulatory system are supposed to work.
Meanwhile, a separate ETF called REX BKCM ETF, which goes under the symbol BKC, is dedicated to investing in blockchain companies. That fund is permitted to invest in GBTC, although it does not currently maintain that position:
“BKC is actively managed to capture total return from global companies that generate revenue from the blockchain ecosystem. Stocks selected include companies that mine, trade or promote the adoption of cryptocurrencies and those that develop or utilize blockchain technology. BKC can invest indirectly in bitcoin through the Bitcoin Investment Trust (GBTC) for up to 15% of the portfolio.”
ARK offers three other ETFs that have allocated funds to GBTC, including:
- The $1.27 billion ARK Innovation ETF (ARKK)
- $657 million ARK Web x.o ETF (ARKW)
- $174 million ARK Industrial Innovation ETF (ARKQ)
Of these three funds, ARKW has the highest allocation investing in GBTC. The fund has invested 0.29% of its assets into GBTC. ARKK, meanwhile, holds 0.21% and ARKQ holds 0.10%.
Although the 0.29% share is small, this is the highest allocation you’ll find invested in bitcoin in any US ETF.
ARK has previously maintained a sizable portion of its assets in GBTC. At times, the manager has kept anywhere from 6 to 10% of assets in ARKW and ARKK in bitcoin. This allocation helped contribute to the meteoric rise of those funds throughout January 2017. Starting in January 2018, however, ARK had substantially reduced its position in bitcoin, which is why the highest-weighted fund holds just 0.29% of its assets in bitcoin right now.
Over the past year, ARKW has given investors a 52% ROI, much better than the 20% returns you would have received from an S&P 500 ETF. Clearly, the fund is performing adequately without the need for a major bitcoin investment:
“ARKW's outperformance is largely due to its out-of-the-box investment scope,” explains ETF.com in their “ETF of the Week” profile on ARKW. “The fund doesn't just focus on tech or internet stocks, but specifically on those tech companies poised to benefit from the shift to cloud computing and mobile technology. And unlike many tech funds, it digs for stocks worldwide.”
ARKW holds many of the same FAANG stocks as its competitors, but it gives those stocks less weight than other funds. Instead of Facebook, Amazon, and Apple, for example, the fund emphasizes stocks like Chinese e-powerhouse Tencent Holdings (6% of the fund’s allocations) and Silicon Valley-based chipmaker NVIDIA (5%).
The top holding in ARKW, interestingly, is Tesla (TSLA), which may give investors pause. Tesla’s stock has been on a roller coaster in recent weeks amid rumors of Elon Musk’s plan to take the company private. Currently, ARKW holds 7% of its funds in Tesla.
Conclusion: You Can (Sort Of) Buy A Bitcoin ETF Today
It’s true: you can legally purchase a bitcoin ETF in the United States today – sort of. ARK’s ETFs have previously allocated 6 to 10% of their portfolio to bitcoin via its Bitcoin Investment Trust ETF (GBTC). Today, however, ARK’s highest-weighted bitcoin fund allocates just 0.29% to GBTC.
Nevertheless, the remainder of the fund is invested in high-tech companies, including blue chip tech firms. The company also offers a separate ETF under the symbol BKC dedicated to investing in blockchain firms. That ETF has previously held a portion of its assets in GBTC, although this is not currently the case.
Technically, we’re still waiting for the SEC to approve the world’s first bitcoin ETF. But investors can still get a piece of the action today with some of ARK’s ETF offerings – including ARKW and BKC.