Just before 2023 ended, ARK Invest CEO Cathie Wood sold all of the company’s remaining Grayscale Bitcoin Trust (GBTC) holdings. The firm’s Next Generation Internet Fund (ARKW) sold 2.25 million shares of GBTC and used some of those holdings to purchase 4.32 million shares of the ProShares Bitcoin Strategy ETF (BITO).

While both GBTC and BITO track the price of Bitcoin with futures, GBTC is slightly different from BITO in terms of its relationship with spot Bitcoin exchange-traded funds (ETFs). 

In its filings with the Securities and Exchange Commission (SEC), Grayscale indicated that it would convert the futures-linked version of GBTC into a spot version of GBTC if its application is approved. This would allow it to keep the same investment and ticker symbol while converting the underlying asset from Bitcoin futures into actual Bitcoins. 

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However, this move from ARK has caused investors to second-guess Grayscale’s plans.

Some believe that ARK is cautious about GBTC’s ability to convert from a futures ETF into a spot ETF. If this is the case, GBTC could be approved for the switch after the release of other prominent applications for spot Bitcoin ETFs. In this event, many investors could pull capital from GBTC and put it into other Bitcoin ETFs. This could cause GBTC to lose value. 

Wood told Bloomberg Television that the trade was made “out of an abundance of caution.” Wood and ARK are not 100% certain that GBTC will be approved for the conversion, so they are looking to remove some risk before the potential for approvals.

Additional caution could be the result of a shakeup in the C suite for Grayscale’s parent company Digital Currency Group (DCG). In late December, the founder and CEO of DCG resigned after a slew of ongoing legal issues. He was succeeded by DCG CFO Mark Shifke.

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While ARK sold GBTC, it also bought BITO. This could be a result of its bullish stance on Bitcoin. If it wanted to retain exposure to Bitcoin before the approvals, BITO is the logical option. However, the move could also have been following ETF mandates, such as a certain amount of the fund has to be invested in crypto-related products.    

Jan. 10 is one date that investors are eyeing for potential approval of spot Bitcoin ETFs. This is because it is the final date for a decision on ARK and 21Shares ETF application after several delays. 

Almost all of the applicants for spot Bitcoin ETFs released their respective expense ratios on Jan. 8. This could be a sign that the applications are closing in on the final stages before approval. 

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