2 Funds that invest in Bitcoin

When Bitcoin suddenly appeared in 2009, few people would think of the concept of currency that exists purely in cyberspace. However, those who were cautious about the central bank’s control and manipulation of the currency quickly caught it, and investors were also looking for ways to diversify their investment portfolios. As Bitcoin becomes more and more popular, Bitcoin without central authority is increasingly used in international remittances and daily business. More than 100,000 merchants now accept Bitcoin for transactions.

Due to its limited supply and a known upper limit, the value of Bitcoin will increase as demand increases, making it an attractive tool for investors-but at the same time a very unstable tool, as As the past few years have shown. The closing price of Bitcoin soared to US$18,402 on December 18, 2017, and as low as US$3,234 on December 13, 2018. As of January 10, 2020, it has just exceeded $8,000.

Bitcoin’s volatility can be attributed to a variety of factors, including the fact that it is still not well understood as a store of value or transfer method. When Bitcoin becomes a security breach or is used for drug trafficking headlines, investors may be very upset about Bitcoin. In addition, the regulatory status of cryptocurrencies remains unclear in most jurisdictions. In the United States, the U.S. Securities and Exchange Commission (SEC) rejected several Bitcoin exchange-traded fund (ETF) applications. Blockchain ETFs holding stocks of companies that invest in blockchain technology are more common; currently, eight such ETFs are traded in a regulated market.

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Therefore, investing directly in Bitcoin can be a bit complicated, and you need to be able to store and protect them. However, investors interested in Bitcoin, whether as a speculative game or as a way to diversify their portfolio, do have several ways to play.

All data are the latest data as of January 10, 2019.

Key points

  • As of January 2020, there is still only one publicly traded exchange-traded fund that invests in Bitcoin, the Grayscale Bitcoin Trust (GBTC).
  • Investors can indirectly access Bitcoin through the ARK Next Generation Internet ETF (ARKW) that holds Bitcoin Trust in their investment portfolio.

Grayscale Bitcoin Trust

The fund is an open-ended private trust Bitcoin Trust established in 2013 by an alternative currency asset management company, and is now sponsored by Grayscale Investments LLC. It started public trading in 2015 under the code GBTC and is now called Grayscale Bitcoin Trust. On January 21, 2020, Grayscale stated that after the US Securities and Exchange Commission approved its Form 10 application, its Bitcoin Trust today became the reporting company of the US Securities and Exchange Commission.

The goal of the fund is to track the potential value of Bitcoin, just as the SPDR Shares ETF (GLD) tracks the potential value of gold. It manages US$3.5 billion in assets (AUM) and an average daily trading volume of 2.65 million shares. The fund’s assets are stored by Xapo, Inc. and are protected by extremely high encryption security. The fund’s expense ratio is very high, at 2%, partly to cover additional storage costs.

The trust itself is only open to qualified investors with incomes of more than US$200,000 (total US$300,000) or net assets of more than US$1 million. The minimum investment is USD 50,000.

However, as an over-the-counter investment tool, investors can buy and sell GBTC like almost any U.S. securities. GBTC can be traded through a brokerage company, and it can also be used in tax preferential accounts such as IRA or 401(k)s. Investors are eligible to buy as little as one share of GBTC public quotation.

Ark Investment Management

ARK Investment Management, headquartered in New York, manages four ETFs with assets under management of more than US$240 million. One of its funds, ARK Next Generation Internet ETF (ARKW) invested in the Bitcoin Revolution by purchasing shares of Grayscale Bitcoin Trust.

ARKW is an actively managed ETF with assets under management of US$358 million.It mainly invests in cloud-based companies with leading next-generation technologies, such as Tesla (TSLA), which currently accounts for nearly 11.02% of the portfolio; Square, Inc. (SQ), nearly 8.53%, and Twitter (TWTR), Only 0.79%. It owns 2,682,597 gray-scale stocks and its current market capitalization is US$25,135,933.89, which represents 1.73% of the portfolio. The fund’s expense ratio is 0.75%.

ARK owns another fund, ARK Innovation ETF (ARKK), which seeks to invest in what it considers disruptive technology, and it has invested in Grayscale in the past. However, its investment portfolio currently does not contain any stocks.

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