ARK Invest Files Crypto ETF Tied to CoinDesk 20

What to Know:

• ARK Invest has filed for two new cryptocurrency ETFs that would track the CoinDesk 20 index, offering diversified exposure to digital assets like Bitcoin, Ether, Solana, XRP, and Cardano.
• The proposed ETFs will utilize cash-settled, regulated futures contracts to mirror the index’s performance, avoiding direct crypto custody.
• These filings signal a growing trend among asset managers like ARK, WisdomTree, and ProShares to provide investors with diversified crypto exposure through ETFs, pending SEC approval.

ARK Invest, led by Cathie Wood, continues to make waves in the crypto investment space. The firm has recently filed with U.S. regulators to launch two new cryptocurrency exchange-traded funds (ETFs). These ETFs aim to track the CoinDesk 20 index, a benchmark that represents the most liquid digital assets in the market, including mainstays like Bitcoin and Ether, as well as altcoins like Solana, XRP, and Cardano. This move underscores the increasing demand for diversified crypto investment vehicles and the ongoing evolution of the digital asset market.

The Structure of ARK’s Proposed Crypto ETFs

Unlike spot ETFs that hold the underlying assets directly, ARK’s proposed ETFs will rely on cash-settled, regulated futures contracts. This approach allows the ETFs to mimic the daily performance of the CoinDesk 20 index without the complexities associated with direct crypto custody and storage. By using futures contracts, ARK aims to provide investors with a regulated and familiar investment vehicle to gain exposure to the broader crypto market. One of the proposed ETFs will track the CoinDesk 20 index in its entirety. The other will track a modified version of the index, excluding Bitcoin by pairing long index futures with short Bitcoin futures. This strategy could appeal to investors who are looking for crypto exposure but are hesitant about Bitcoin’s volatility or dominance in the market. These products are designed to give investors diversified access to crypto assets without the complexities of custody or direct token ownership.

Institutional Interest and Regulatory Landscape

The filings by ARK Invest are part of a broader trend among asset managers to introduce diversified crypto ETFs. Firms like WisdomTree and ProShares have also proposed similar crypto index ETFs that utilize regulated futures. However, none of these filings have yet received approval from the Securities and Exchange Commission (SEC). The SEC’s stance on crypto ETFs has been cautious, with a focus on investor protection and market manipulation concerns. The approval process typically involves the exchange, in this case NYSE Arca, submitting a 19b-4 form, which initiates the formal review by the SEC. The outcome of these applications will likely set a precedent for future crypto ETF products and shape the regulatory landscape for digital asset investments. The institutional interest in offering diversified crypto exposure through ETFs highlights the growing acceptance of cryptocurrencies as an asset class.

ARK Invest’s Broader Crypto Strategy

While ARK Invest has already gained significant attention for its involvement in spot Bitcoin ETFs, these latest filings demonstrate a strategic move toward broader coverage of the crypto market. By offering ETFs that track the CoinDesk 20 index, ARK is positioning itself to capture a wider range of investors who are interested in diversifying their crypto holdings beyond Bitcoin. This approach aligns with Cathie Wood’s long-term bullish outlook on the crypto space and her belief in the transformative potential of blockchain technology. The inclusion of altcoins like XRP, Solana, and Cardano in the index reflects the growing recognition of these assets as viable investment options. ARK’s commitment to providing innovative crypto investment products underscores its confidence in the continued growth and maturation of the digital asset market.

Forward-Looking Insights on Diversified Crypto ETFs

The potential approval of diversified crypto ETFs could significantly impact the market structure and liquidity of digital assets. These ETFs would provide a regulated and accessible avenue for institutional and retail investors to gain exposure to a basket of cryptocurrencies, potentially driving increased demand and price appreciation. Furthermore, the use of futures contracts could enhance price discovery and reduce volatility in the underlying crypto assets. The SEC’s decision on these filings will be closely watched by the industry, as it could pave the way for a new wave of crypto investment products. Ultimately, the success of these ETFs will depend on factors such as regulatory clarity, market adoption, and the performance of the underlying digital assets.

ARK Invest’s filing for these new cryptocurrency ETFs represents a significant step forward in the evolution of crypto investment products, providing investors with diversified exposure to the digital asset market. As the regulatory landscape continues to evolve and institutional interest in crypto grows, these types of ETFs could play a crucial role in driving mainstream adoption and shaping the future of finance.

Related: XRP Signals Undervaluation More Than Bitcoin

Source: Original article