Meet The Only ETF In The US That Owns Bitcoin

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by Tyler Durden
Tuesday, Feb 09, 2021 - 03:11 PM

On a corporate scale, adoption of bitcoin could still very well be in its early innings. This is especially true when you consider the very few corporations that own it, and that very few ETFs have stakes in it.

But one ETF has significant exposure to bitcoin. Cathie Wood's ARKW not only owns bitcoin through the Greyscale Bitcoin Trust, but it also (of course) owns Tesla - which, in turn, now owns bitcoin.

As ETF expert Eric Balchunas noted on Monday, ARKW has a 3.7% weighting in the Grayscale Bitcoin Trust and a 9.25% weighting in Tesla. Using Monday's closing price, Tesla has about 1/10th of 1% of its market cap in bitcoin holdings now. 

But in an investing world where not many ETFs have exposure to bitcoin, ARKW's holdings in GBTC and TSLA make it prime to ebb and flow along with the price of bitcoin. Here are ARKW's top holdings:

Balchunas also noted that ARKW saw record volume on Monday of $413 million, likely as a result of the news of Tesla's $1.5 billion stake in bitcoin. He notes that ARK now has 3 ETFs that are in the 2% by AUM. 

Recall, we noted just days ago that Wood's ARK Invest now officially has over $50 billion in ETF assets under management, a stunning rise from the just $3.6 billion the fund managed this time last year. Because, hey, $5 trillion rolling off of the Fed printing press has to wind up somewhere, right?

So far, in 2021, investors have poured almost $11 billion into Wood's funds, according to Bloomberg. ARK's funds focus on ESG investing, EVs, genomics and fintech. And while Bloomberg notes her "eye popping returns" are catching attention, there has been nary a discussion about how the valuations of ARK's underlying ETF components have ballooned with the markets at all time highs.

Regardless, Todd Rosenbluth, director of ETF research for CFRA Research, said: “This is a key milestone, and a sign that the ETF business is not just dominated by firms tracking indexes. Given investor focus on long-term thematic investing, there’s room for additional growth for Ark and other active managers.”

Wood is especially popular in South Korea, where she has become "something of a celebrity". Social media posts out of the country refer to her as "Money Tree", as a result of her ARKK fund rising 19% already this year, after rising 149% in 2020. 

And while Wood's funds saw 4 straight days without an inflow during last week's GameStop saga (it's almost like they are drawing from the same 'smart money'), that hasn't stopped Wood from offering a new line of merchandise in an online ARK store, including shirts that read "Stay Innovative". 

Mohit Bajaj, director of ETFs for WallachBeth Capital said: “Performance leads to inflows. All their funds have done very well, which had led to such huge amounts of money going into them. Investors still believe in the fund manager.

Recall, we noted at the end of January that short interest in Ark's innovation fund was on the rise as well. Shorts are also piling into the firm's other ETFs, including its $9.4 billion Genomic Revolution ETF and its $5.9 billion Ark Next Generation ETF, we noted at the time. As a reminder, the fund's success in 2020 was largely tied to the parabolic move in Tesla. 

Dave Nadig of ETF Trends told Bloomberg: “You can’t expect any shortable asset to have the kind of meteoric rise ARKK has had and not attract almost mechanical short-selling. There are, quite literally, traders who have screens for ‘ETFs that went up X far over Y time’ to use as contrarian short indicators.”

And us? We believe there may be no better example in modern history of how Central Banks have skewed markets from focusing on fundamentals to rewarding whatever "trendy" cash furnace of a company is popular this week than Wood's ETF inflows.