ARK Invest’s Bitcoin ETF is Cathie Wood’s latest foray into the future

This is Fortune’s Rey Mashayekhi, filling in for Hackett this week while he takes a well-deserved break.

Since I’m a finance journalist working in 2021, it goes without saying that I’m fascinated by Cathie Wood. We can’t help ourselves; how else do you explain the sheer volume of profiles written about the ARK Invest honcho this year (including one by our very own Anne Sraders)? Despite a rocky start to the year that has seen her investment firm hit by a sell-off in high-tech growth stocks, Wood’s forward-thinking, actively managed approach to the market has won her no shortage of plaudits, as early bets on the likes of Tesla and Square have paid off big time for her investors.

It’s part and parcel of Wood’s brand that she’s a huge believer in crypto; she went big on Coinbase’s April IPO and still believes that Bitcoin will go to $500,000 despite its recent struggles. “We go through soul searching times like this and scrape the models, and yes—our conviction is just as high,” she told Bloomberg in May.

So it was not the biggest surprise when an SEC filing on Monday revealed that Wood’s latest exchange-traded fund will revolve around Bitcoin itself. ARK Invest is partnering with Switzerland-based 21Shares on the fund, named the ARK 21Shares Bitcoin ETF, which will aim to track the performance of the cryptocurrency through its investments.

ARK and 21Shares are far from the first fund managers to attempt a Bitcoin ETF. As Chris Morris detailed in this great explainer, more than a dozen firms have pending applications with the SEC for Bitcoin funds of their own—only for the regulator to repeatedly delay rulings on the matter. But ARK would be among the highest-profile names to enter the market, and the ETF would let Wood’s fund directly track Bitcoin itself, rather than having to resort to indirect exposure through investing in proxies like Coinbase and Grayscale Bitcoin Trust (both major holdings in other ARK funds).

The growing number of Bitcoin ETF applications—in the face of no clear regulatory guidance on the matter, no less—speaks to the increasing demand for investment products in the cryptocurrency realm. Still, it’s all for naught until the SEC finally gives the green light to investors. Wood herself said earlier this year that she believed the appointment of new SEC Chairman Gary Gensler, who taught a digital currency class at MIT, boded well for the approval of a Bitcoin ETF. “I think we have individuals now involved who really understand the space,” she told CNBC.

It remains to be seen whether that ends up being the case. While Gensler has spoken of the need for “greater investor protection” in the crypto market, those with a more generous view of government regulation would argue that an SEC-approved Bitcoin ETF would represent just that. Still, the SEC has continued to drag its feet on a decision.

In the meantime, Wood’s fans and admirers will point to ARK’s latest foray—should it come to pass—as a testament to her keen eye for new, innovative investments that aim to capitalize on the ways of the future.

Rey Mashayekhi
@reym12
rey.mashayekhi@fortune.com

DECENTRALIZED NEWS

Credits 🚀

Crypto trading accounted for 17% of Robinhood’s Q1 revenue—with Dogecoin alone representing 34%(!) of that figure ... Hedge funders Steven Cohen and George Soros are getting into crypto ... German exchange operator Deutsche Borse acquired Switzerland’s Crypto Finance ... Husband-wife duo Tom Brady and Gisele Bundchen took a stake in crypto exchange FTX ... OpenAI’s Sam Altman is backing a crypto venture that wants to deploy iris-scanning technology ... Brazilian crypto exchange Mercado Bitcoin raised $200 million in funding from SoftBank ... Citigroup has launched a new wealth management unit focused on crypto and blockchain ... Notoriously gold-obsessed India has fallen head over heels for crypto ... Elon Musk and Jack Dorsey will dish on Bitcoin at a conference this month ... Crypto firms have inked sponsorship deals in the NBA and with Formula 1 racing ... ICYMI, El Salvador is handing out Bitcoin to its citizens.

Debits 🐻

Bitcoin had a historically bad second quarter ... Crypto exchange Binance was banned by U.K. regulators ... In turn, crypto firms are abandoning efforts to register in the U.K. ... The co-chair of Congress’s blockchain caucus says authorities should have the ability to reverse crypto transactions ... Mexico’s central bank has warned financial institutions against dealing in crypto... After ICP’s dramatic fall, WhaleFarm’s sudden crash is the latest DeFi collapse ... China’s crypto crackdown has forced miners to flee overseas ... Kazakhstan is imposing an electricity surcharge on crypto miners ... Crypto exchanges in India are having trouble finding payment solutions ... Robinhood’s crypto business prompted a delay in its forthcoming IPO ... The growth in stablecoin issuances may pose “contagion risks” ... Amid a labor shortage, crypto firms are struggling to find talent ... ICYMI, the brothers behind South Africa’s largest crypto exchange vanished with $3.6 billion in Bitcoin ... Bitcoin billionaire Mircea Popescu has reportedly died aged 41.

FOMO NO MO

Traders are garnering juicy returns by lending out cryptocurrencies as the fast-growing field of decentralised finance throws up new but highly risky opportunities to make money.

The number of consumer-oriented platforms offering yields on crypto balances has grown rapidly, with annual interest rates ranging about 7 to 12 per cent for various coins such as bitcoin and “stablecoins” including tether.

Traders can chase even higher rates through “yield farming”, the practice of scouring the world of decentralised finance — or DeFi — for the best yields available from more obscure projects and coins. These shortlived opportunities can advertise interest rates as high as several thousand per cent to pull in digital cash.

That’s from the Financial Times’ insightful report Wednesday on the ever-growing, increasing complex yield-generating strategies populating the crypto realm. While the practice of offering interest on crypto balances is a “almost a no brainer” in the eyes of Gemini’s Noah Perlman, there is a concern that less sophisticated retail investors don’t know exactly what they’re getting into.

Like banks, crypto yield platforms lend out their customers’ digital assets at higher interest rates than they offer to those customers. But unlike banks, they operate with relatively little regulatory oversight or investor protections should they sustain losses—potentially leaving those investors holding the bag should things go wrong.

Still, the opportunity to earn interest on crypto balances is particularly appealing at a time when choppy market conditions have prompted many traders to sit on the sidelines. The practice has grown in popularity as a way to make money “when the market is not suitable for trading,” according to Allen Ng, whose Hong Kong-based crypto platform Kikitrade just launched an 8% “savings account.”

BUBBLE-O-METER

2%

That’s the percentage of CFOs recently surveyed by Fortune and market research firm NewtonX who say their companies plan on adopting cryptocurrency as a form of payment by the end of 2022. Only 1% of respondents said their companies currently accept crypto.