Yesterday’s surprise news that the ARK Web x. There are issues on a few levels that I have with this announcement. I get the allure of Ark trying to gtbc bitcoin mining some noise in its flagship fund.
12 million in assets at the moment. It’s also really suffered from on-screen liquidity problems, with less than a few thousand shares trading hands every day. But the thing is, I can’t help but root for it. It’s not crazy that it’s failed to find traction—it’s actively managed. And like most actively managed funds, it needs time to develop a track record before core ETF buyers, like financial advisors, will be willing to take the leap of faith. It’s about to come up on its one-year anniversary, and the truth is, it’s actually done very well versus broader-based tech funds.
So, as much as I think the fund probably deserves more attention than it’s received so far from investors, I can’t help but think the timing of the bitcoin announcement is slightly set to mark the one-year anniversary and crow-able performance. I’m a bit more skeptical about the way in which it’s tackling bitcoins. ETF—an actual ETF in registration that would solely invest in bitcoins. But Ark isn’t—instead, it’s investing in a company listed on the OTC pink sheets—the Bitcoin Investment Trust, which you can find on OTC under the ticker GTBC.
On the surface, it looks like a closed-end fund—accredited investors can petition authorized participants to create or redeem shares in 100-share baskets in a process clearly based on the fundamental precepts of how ETFs work. But let me be perfectly clear: It may look like a duck, and quack like a duck, but GTBC ain’t no duck. It’s essentially entirely unregulated by the SEC. In fact, the whole reason Ark can get away with this quasi-ETF-like structure is precisely because the SEC hasn’t even decided what bitcoins are yet. To the extent that bitcoins are deemed to fall within the definition of a security for SEC purposes, the Trust and the Sponsor may be required to register and comply with additional regulation under the Investment Company Act of 1940.
Moreover, the Sponsor may be required to register as an investment adviser under the Investment Adviser Act of 1940 and register the Trust as an investment company. To translate that into Human: As soon as the SEC decides what bitcoins actually are, GTBC may get slammed with expenses or have to close. Even if you love Internet stocks, there’s an enormous difference between investing in a small-cap startup company and investing in an essentially unregulated entity that may have to close precisely when bitcoins themselves graduate into the big leagues at some point in the future. If that weren’t bad enough, the connection between the underlying net asset value of the bitcoins in GTBC and the trading price is tenuous at best.