Cathie Wood’s ARK Invest has been selling its shares of the Grayscale Bitcoin Trust (GBTC) in the past month, amid the anticipation of a possible approval of a spot Bitcoin exchange-traded fund (ETF) in the United States. GBTC is one of the largest and oldest crypto investment vehicles, but it has been trading at a significant discount to its net asset value (NAV) for most of 2023.
According to the daily trading data from ARK Invest, the ARK Next Generation Internet ETF (ARKW) has sold a total of 1,487,209 GBTC shares since Nov. 18, 2023. The latest sale was on Dec. 18, when ARKW offloaded 809,441 GBTC shares worth $27.9 million, based on the closing share price of $34.5.
The GBTC sales have reduced ARK’s exposure to the Grayscale Bitcoin Trust, which was once the third-largest holding of ARKW, accounting for nearly 10% of its portfolio. As of Dec. 18, GBTC’s weight in ARKW has dropped to 6.84%, with a market value of $117 billion. GBTC is now ranked fourth, behind Coinbase, Roku, and Block.
ARK Invest Increases Its Stake in Block
While shedding GBTC, ARK Invest has been increasing its stake in Block, the financial payment processor co-founded by Twitter (now X) co-founder Jack Dorsey. Block, formerly known as Square, is one of the leading companies in the crypto space, offering Bitcoin buying and selling services through its Cash App and Bitkey wallet.
On Dec. 18, ARKW added another 347,692 Block shares worth $25.7 million, bringing its total holdings of Block to 6.83% of its portfolio, with a market value of $116.9 billion. Block is now close to overtaking GBTC as the fourth-largest holding of ARKW. Block has also launched its own self-custody Bitcoin wallet called Bitkey, which is available in over 95 countries.
ARK Invest Awaits the SEC’s Decision on Bitcoin ETF
The GBTC sales and Block purchases by ARK Invest reflect the changing landscape of the crypto investment market, as the U.S. Securities and Exchange Commission (SEC) is expected to make a decision on several applications for a spot Bitcoin ETF in early 2023. A spot Bitcoin ETF would allow investors to directly buy and sell Bitcoin through a regulated exchange, without the need for a trust or a premium/discount.
ARK Invest is one of the applicants for a spot Bitcoin ETF, along with other prominent firms such as Fidelity, VanEck, and Valkyrie. ARK Invest has revised its Bitcoin ETF proposal to comply with the SEC’s cash-only model, which requires the ETF to hold only Bitcoin and cash equivalents, and not futures contracts or other derivatives. ARK Invest has also partnered with 21Shares, a Swiss-based crypto ETF provider, to launch its Bitcoin ETF.
A spot Bitcoin ETF could pose a serious threat to GBTC’s dominance in the crypto market, as GBTC has been suffering from a persistent discount to its NAV, meaning that investors are paying less for GBTC shares than the underlying Bitcoin. GBTC’s discount has widened to over 20% in December, as investors anticipate a cheaper and more efficient way to access Bitcoin through an ETF.
GBTC Still Holds Over $20 Billion Worth of Bitcoin
Despite the GBTC sales by ARK Invest and other investors, GBTC still remains the largest crypto investment vehicle in the world, holding over $20 billion worth of Bitcoin as of Dec. 17, 2023. GBTC represents over 3% of the total Bitcoin supply, and has a significant impact on the Bitcoin market.
Grayscale, the parent company of GBTC, has been trying to address the discount issue by launching new products, such as a digital large cap fund and a decentralized finance fund, as well as applying for a Bitcoin ETF conversion. Grayscale has also met with the SEC to discuss the details of its Bitcoin ETF plan, and has expressed its confidence that it will eventually obtain the approval.
Grayscale has also been expanding its global presence, launching its products in Canada, Europe, and Asia. Grayscale has also partnered with major financial institutions, such as Bank of New York Mellon, to provide fund accounting and administration services for its products.