It's been about two years since spot Bitcoin exchange-traded funds (ETFs) started trading in the U.S., marking a seminal event in the histories of both the ETF industry and the broader cryptocurrency space.
One of the most significant funds in this still young ETF category is the ARK 21Shares Bitcoin ETF (ARKB 0.55%). Just a couple of weeks past its second birthday, the ARK ETF is home $3.3 billion in assets under management (AUM), meaning just five crypto ETFs of any variety are larger than this fund.
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That's an impressive start for any two-year-old ETF, and it confirms that advisors and retail investors alike are embracing this product. Still, that popularity also indicates that market participants, particularly those new to the game, need to understand the mechanics of spot Bitcoin ETFs, including this ARK fund. Here are three need-to-know facts about this fund.
1. Investors own shares, not Bitcoin directly
The ARK Bitcoin ETF and its brethren are comparable to funds such as the SPDR Gold Shares in that investors buy shares in a fund that provides exposure to the underlying asset. However, investors purchasing this ETF don't directly own Bitcoin any more than a gold ETF investor owns gold bars, which is to say they don't.
In fact, the ARK ETF is, at its core, an index fund as it tracks the CME CF Bitcoin Reference Rate – New York Variant. Prospective investors need to remember that point.
2. Unlike Bitcoin, the ETF doesn't trade all day
For many investors, one of the coolest things about cryptocurrency is that it's a true 24/7 market. Want to buy some Bitcoin or another digital currency at midnight or on Christmas Day? No problem. Your order will be processed, and you'll immediately add to your Bitcoin stake.
That's not the case with the ARK fund or any other Bitcoin ETF, for that matter. Remember what ETF stands for. These are funds that trade on exchanges, meaning any ETF can only be bought or sold when the exchange is open.
NYSEMKT: ARKB
Key Data Points
And because we're talking about an ETF here, there's an expense ratio to consider. The ARK fund charges 0.21% annually, or $21 on a $10,000 investment. While the fee is nominal, it may be off-putting to experienced crypto investors accustomed to holding digital currencies in their own wallets or on exchanges where fees simply for holding aren't part of the equation.
3. Cathie Wood is a Bitcoin bull
Put this in the "for what it's worth" column, but ARK co-founder and CEO Cathie Wood is a longtime Bitcoin bull. Optimistic investors considering the firm's Bitcoin ETF may view Wood's support of the digital currency as naysayers view it as her talking her book. That call should be made on an individual basis.
When it's said the ETF issuer is bullish on Bitcoin, it's really bullish. ARK forecasts a total cryptocurrency market capitalization of $28 trillion by 2030, implying a more than ninefold increase from the current level of $3.01 trillion.
It expects Bitcoin will represent 70% of that figure, or $19.6 trillion. Not only is that more than four times Nvidia's market cap, but that prediction implies the largest digital currency is in for an 11x run from current levels.
