ARK Invest teams up with 21shares to launch new crypto-focused ETFs. ARK Invest founder and CEO Cathie Wood says the partnership made sense given how complementary the companies’ areas of expertise are. Wood says that bitcoin (BTC-USD) is “the first global, private rules-based digital monetary system in history” adding that global monetary policy is “independent, dependent on nothing but human decision-making” and that “the monetary system is bitcoin.”
Ark is one of several companies trying to launch a spot bitcoin ETF. Wood says “something has changed,” noting that the Securities and Exchange Commission responded to their filing with questions instead of just rejecting it. Wood believes this means the odds of approval have increased. Overall, Wood is still bullish on bitcoin, saying her base case for the cryptocurrency is $600,000 to $650,000. However, she thinks it could rise, given the scarcity of the currency and the potential for more institutional investment if the spot bitcoin ETF is approved.
You can see the full interview with ARK Invest’s Cathie Wood on Wednesday, November 15th at 9am ET on Yahoo Finance.
JULIE HYMAN: One asset that, perhaps surprisingly, did not rise today was bitcoin, although it rallied late today, falling some 3.4%. And on this very day, Cathie Wood or ARK Invest in cooperation with 21shares announced. It will launch a new suite of digital asset ETFs. They will be actively managed.
I had the opportunity to talk with her about digital assets, these products in general, and of course her still optimistic attitude about cryptocurrency.
CATHIE WOOD: This is the first global, digital, private rules-based monetary system in history. That’s a really big idea. When we wrote the paper with Art Laffer– you know Art Laffer’s supply-side economics, the Laffer curve– he said, I’ve been waiting for this since they closed the gold window in 1971. So he’s been waiting 50 years for this, right? And he’s very excited about all things crypto, but especially bitcoin, because he believes, and it’s true, that monetary policy in the world is fickle. It depends on nothing but human decision-making.
And this will restore discipline, rigor in…
JULIE HYMAN: These particular products you are talking about.
CATHIE WOOD: Well, bitcoin is. The monetary system is bitcoin. And so, yes, why now for these? We have been working with 21shares since I met Ophelia at the ETF confab in 2018. They are really just starting their business. And I said, you know, we want to move towards crypto. You are completely crypto. They were focused on infrastructure, regulations, really paving the way. They had to invent things to make this happen.
And we knew that it was not our core competence. And so we– but we started talking. Our core competency is research on disruptive innovation. And they do research. They conduct deep technical market research. Our research deals with the disruptive innovation that it represents. And we have only been gathering for five years. It was natural for us to get together.
They or 21shares are the largest crypto ETP provider in the world, $1.5 billion. They have 35 different funds. Most of them in and around Europe. They sought entry into the US. And we were looking for infrastructure. And, you know, we’re thrilled to partner with them given how much groundwork they had to lay to make this happen.
JULIE HYMAN: Speaking of fundamentals, another product you’re working on is of course the spot bitcoin ETF, which you’re also a partner on with them. And you have received your documentation. There are a lot of applications. Every day, it seems, there’s a new rumor about one of these things getting approved. What are you hearing from the SEC at this point? It’s– you know, there’s a January deadline that I know people were expecting. How confident are you that you will get approved?
CATHIE WOOD: Well, something has changed. So we made several submissions. And we were just rejected. I never got any questions, I never got any answers. This time, this summer, we got questions from the SEC. Now, normally, when you get questions from the SEC, you just go, oh, my God. We were thrilled to get the questions, because it means they are now engaged.
We met with a number of researchers at the SEC on the research side. And they are extremely sophisticated. They know what they are talking about. And the level of sophistication of their questions suggested, OK, now they’re deep into this. And we answered those questions. We have not received an answer. And that’s a good sign. They never tell you that– they tell you that you satisfied them. But if you don’t hear from them, they– that usually means you’ve satisfied the responses to the requests.
I know it was new. We also know that BlackRock has questions. We put our answers first. I think they followed. And I’m not sure about anyone else. That was different. And he says, OK, there’s movement. And we are the first in line, just because we were constantly charging. Others gave up. And so– but we just kept filling. We just held on– and became the first in line. I know David vs. Goliath, right?
And January 10 is the last deadline. They managed to push it. It’s very orchestrated. Push, push, but finally, they approve or reject on January 10.
JULIE HYMAN: What do you think?
CATHIE WOOD: Well, I mentioned again that something has changed.
JULIE HYMAN: Law.
CATHIE WOOD: That’s good. The odds have gone up. Only one wrinkle has appeared in the last few days. They will approve the number immediately. There won’t be just one. That would be picking a winner given the way ETFs work.
But we know that Grayscale wants to turn into an ETF. I don’t know how practical that is, or if the SEC will allow them, or if they need special relief. I just don’t know the rules. Grayscale said it will sue the SEC again if it rejects the conversion. If they did it before January 10, I don’t know if it would blow everything up again.
JULIE HYMAN: And for the others.
CATHIE WOOD: For everyone.
JULIE HYMAN: Law.
CATHIE WOOD: That. I just don’t know. I do not know
JULIE HYMAN: So there are still a lot of unknowns. You mentioned that you bought bitcoins for 250 a long time ago. So going back from 250 to 35, 36 looks pretty good. But I don’t think it’s the 100,000 that you and I have talked about at various points or even loftier numbers. Where are we in that cycle?
CATHIE WOOD: I mean– so if we look at the reasons bitcoin is going to go up, so our base case today is $600 to $650– $650,000, and our bull case, based on the scarcity that’s developing now, we’re at about 19.5 million bitcoin out there, there will only be 21 million ever. And we believe in it.
We think that if the SEC blesses a bitcoin ETF, institutions will feel like the coast is clear for them. And we know that many institutions have been exploring crypto assets for some time and agree that it is a new asset class. Bitcoin was the first in a new asset class. We wrote– we wrote a paper in 2000– I think it was ’16, the bell was ringing for a new asset class. And our director of digital assets said to me, do you realize this happened today? We’re calling for a new asset class. I said, oh, I didn’t make that connection.
Anyway, for institutions to understand when there’s a new asset class, it’s– there’s an opportunity to diversify and increase the return per unit of risk. That is very important. They also learned that bitcoin in particular can be a hedge against inflation and deflation.