For investors looking for clues about the future price movement of Bitcoin (CRYPTO:BTC)Cathie Wood from Ark Invest is worth keeping an eye on. While she is known for her $1 million Bitcoin price predictions, she has also become one of the biggest proponents of ETFs that give retail investors access to Bitcoin.
This is where things get interesting because not all Bitcoin ETFs are created equal. So which Bitcoin ETFs does Wood like and dislike? To answer this question, we need to take a closer look at their recent moves.
What did Cathie Wood buy and sell?
Looking ahead to 2024, Ark Invest has initiated a strategy to scale up the market ProShares Bitcoin Strategy ETF (NYSEMKT:BITO). At the time, this was the most popular Bitcoin ETF and the best way to leverage Bitcoin without buying it directly on the crypto market. All of this was in anticipation of the SEC approval of the new batch of Bitcoin ETFs in January, which Wood predicted would send the price of Bitcoin skyrocketing.
Following the official launch of the new Bitcoin ETFs on January 11, Ark Invest began closing its positions in the ProShares Bitcoin Strategy ETF. At the same time, the company began pouring money into the new venture Ark 21Shares Bitcoin ETF (NYSEMKT:ARKB). Wood made headlines with significant sales of the ProShares Bitcoin Strategy ETF in January and again in April when her company finally sold the last shares.
The method to madness
At first glance, this seems like a lot of paperwork. Since the money eventually ended up in a Bitcoin ETF managed by Wood’s investment firm, one could conclude that this was the end goal of all of these moves.
But as mentioned above, not all Bitcoin ETFs are created equal, and there is a bigger story here. Although the names of the ProShares Bitcoin Strategy ETF and the Ark 21Shares Bitcoin ETF are very similar, they are very different investment products. There is a simple reason for this: the ProShares product is a futures-linked Bitcoin ETF, while the Ark Invest product is a spot Bitcoin ETF.
In other words, the ProShares Bitcoin Strategy ETF tracks the price of Bitcoin using financial derivatives such as Bitcoin futures contracts, while the Ark 21Shares Bitcoin ETF tracks the price of Bitcoin directly on the “spot” crypto market. This is significant as it means the new spot Bitcoin ETFs can better track the price of Bitcoin and have significantly lower expense ratios.
A better way to analyze Wood’s recent moves is that they are part of a broader strategy aimed at getting the best possible price risk for Bitcoin while keeping fees and costs to a minimum. Since their company currently believes that Bitcoin could reach a price of $1 million before 2030, this makes a lot of sense. Your goal is to get Bitcoin as efficiently as possible.
Which Bitcoin ETF should you buy?
However, this doesn’t mean you should buy Wood’s spot Bitcoin ETF. The SEC approved 11 different spot Bitcoin ETFs back in January, so you have plenty of options.
In terms of assets under management, there are currently two other spot Bitcoin ETFs – the iShares Bitcoin Trust (NASDAQ:IBIT) and that Fidelity Wise Origin Bitcoin Fund (NYSEMKT:FBTC) – which perform better than Ark Invest’s Bitcoin ETF. For example, the iShares Bitcoin Trust manages over $17 billion in assets, compared to just $3 billion for the Ark 21Shares Bitcoin ETF.
However, there is a lot to learn from Wood and Ark Invest. The most important lesson here is that you should always know what you are buying and how that purchase fits into your overall investment strategy. Before you buy a new Bitcoin ETF, you should know which type you are buying. If in doubt, you can use an online Bitcoin ETF tracker to check whether it is a “spot” or “futures” ETF.
However, the only type of Bitcoin ETFs you should avoid right now are any futures-linked Bitcoin ETFs. Instead, you should consider following Wood’s lead and investing in one of the new spot Bitcoin ETFs. You get better price targeting on Bitcoin and save a lot in fees and costs.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
The 1 Type of Bitcoin ETF to Avoid, According to Cathie Wood of Ark Invest, was originally published by The Motley Fool