Ark Invest is the latest to amend the ARK 21Shares Bitcoin Spot ETF (ARKB) according to a filing with the Securities and Exchanges Commission (SEC) this Monday.
The amended filing states redemption and the creation of shares will be in cash, with no option for in-kind, and adds details regarding seeding. It says:
“Financial firms that are authorized to purchase Shares from or redeem Shares to the Trust (known as ‘Authorized Participants’) will purchase Shares by depositing cash in the Trust’s account with the Cash Custodian.
This will cause the Sponsor, on behalf of the Trust, to automatically instruct a designated third party, who may be an affiliate of an Authorized Participant and with whom the Sponsor has entered into an agreement on behalf of the Trust (each such third party, or the Prime Broker or the Lender (as defined below) as applicable, a ‘Bitcoin Counterparty’), to (i) purchase the amount of bitcoin equivalent in value to the cash deposit amount associated with the order and (ii) deposit the resulting bitcoin deposit amount in the Trust’s account with the Bitcoin Custodian, resulting in the Transfer Agent crediting the applicable amount of Shares to the Authorized Participant.”
SEC has forced some applicants to only offer cash redemption to start with as they do not want broker dealers to handle bitcoin.
Ark’s choice to amend as per SEC’s liking is another indication the ETF approval is coming within three weeks.
The deadline for this spot ETF is January 10th by which SEC has to approve or deny. Considering some statements by SEC’s chair Gary Gensler, who all but said courts have practically ordered SEC to approve, the greenlight is almost guaranteed at this point.
So this ETF now has $100.
See Also: Ark Invest Cuts Bitcoin Trust Holdings Despite Bullish Predictions
“In its capacity as Seed Capital Investor, the Sponsor agreed to purchase $100 in Shares on December 12, 2023, and on December 12, 2023 took delivery of 2 Shares at a per-Share price of $50.00 (the “Seed Creation Baskets”). As of the date of this Prospectus, these 2 Shares represent all of the outstanding Shares,” it says.
That means they haven’t bought the bitcoins, or at least not officially. They could always arrange over the counter deals (OTC), but realistically you’d expect them to have some sort of an automated system.
That is, creation and redemption is an ongoing affair, which presumably means that the buying has not yet quite begun.
In our crypto world, for a successful listing you need some sort of a liquidity pool and a market making ‘pot’ that provides the initial market.
That in itself would be a source of demand for bitcoin, but whether they have sourced them OTC or whether they will Coinbase Pro it on the go or what exactly is the arrangement, is not quite on the disclosures.
Instead we have flow charts of market maker and broker dealer and words that sort of mean nothing, to us anyway, rather than the actual bitcoin addresses and whether they got the coins yet or not.
That’s our traditional system, trust and you can’t verify yourself, yet anyway because eventually hopefully we’ll definitely find the public addresses of at least some of these ETFs.
For now our reasonable assumption is that maybe some have bought bitcoin, but the vast majority are yet to be bought.
The applicants obviously won’t say anything, regarding this or anything else except what comes through official channels, but considering we’ve waited a decade, we’ll wait three weeks more when they won’t be terrified of the SEC anymore.
So, it’s happening. Just what exactly? Well, it remains to be clarified whether approval means trading begins, but once it does, they’ll ring the bell on Wall Street, we’ll see the volumes on the first day, and then it becomes a new market to news and watch from then on.
The CME futures volumes were atrocious when they first started out. Some have pointed out the bitcoin futures ETF – it was only one that traded first, BITO – got $1 billion in volumes on the first day, so some may be expecting the same for the spot ETF.
We think there might be a case to be made that volumes will actually be atrocious to start with, just as with the futures.
It’s not the 2021 mania, maybe bitcoiners are waiting to allocate some of their stocks/pensions portfolios, so perhaps not atrocious, but expectations are that numerous ETFs will be approved at the same time so the volumes will spread out.
On the other hand, the CME futures were more Wall Street, and in 2018 when Wall Street was not really paying attention to bitcoin or crypto.
The ETF is both Wall Street and retail. However, except what has remained of the crypto crowd that has gone through the bear – and maybe some that returned in the past couple of months – retail arguably isn’t quite going crazy about crypto right now.
In fact, despite the price action, crypto is sort of dead. Or that’s what it feels like out there in the wild. So will volumes reflect that?
We’ll see. Whatever happens, there will probably be a case for bulls and bears, as always, but a whole new market is opening up as bitcoin – and soon Eth to follow in May – begins going mainstream in investment portfolios.
