This article is more than three months old

Grayscale and Ark have a hidden edge over BlackRock in the Bitcoin ETF race

Grayscale and Ark have a hidden edge over BlackRock in the Bitcoin ETF race
The SEC might even delay Grayscale's launch to level the playing field with BlackRock, led by Larry Fink. Credit: Rita Fortunato/DL News
  • Bitcoin spot ETFs issued by Grayscale and Ark Invest have an advantage over competitors once the SEC gives the nod.
  • Grayscale’s Bitcoin Trust already handles more than $150 million in transactions a day.
  • Ark Invest is able to pour at least $100 million into its own ETF as soon as it’s approved.
  • The SEC may even hold Grayscale back to keep “a level playing field.”

Grayscale and Ark Invest may have an advantage against heavyweights like BlackRock and Fidelity in the war for Bitcoin spot exchange-traded funds, according to analysts from Bloomberg Intelligence.

Let’s dive into it

Clear favourites and early edges

Unlike BlackRock, Grayscale and Ark Invest have been trying to issue a Bitcoin spot ETF for years.

Now that the Securities and Exchange Commission appears so close to approving these products, the two firms are poised to begin the ETF race with significant advantages.

Grayscale’s application differs from other issuers in that it is looking to convert a pre-existing Bitcoin Trust, GBTC, into a spot ETF. GBTC holds $27 billion in assets and processes over $150 million daily..

“That’s a huge advantage for GBTC and makes it a clear favourite,” Bloomberg Intelligence ETF expert Eric Balchunas posted on X, adding that GBTC would immediately become part of the top 1% of all ETFs in existence were it to launch in its current form.

“It’s possible the SEC holds [Grayscale] back from the starting gate in the name of keeping a level playing field,” Balchunas also said.

Balchunas and fellow ETF expert James Seyffart previously said the SEC would likely try to avoid playing “kingmaker” by greenlighting all ETF applications at the same time.

Join the community to get our latest stories and updates

Ark Invest, meanwhile, recently closed its GBTC position and placed $100 million of its proceeds into ProShares’ Bitcoin futures ETF.

Ark CEO Cathie Wood told Bloomberg that the move was due to “tax and regulatory uncertainties” around the Bitcoin Trust.

But Balchunas said that Ark was likely using the Bitcoin futures ETF as a “temporary parking spot” before placing the money into Ark’s own ETF after the SEC gives it the nod.

“This potential bump in volume and flows might provide an early edge over rivals,” Balchunas said. “Flows and volume are crucial in the marketing of an [ETF.]”

The analyst noted that Ark’s influx might come in chunks, which would create a perception that its ETF is attracting consistent interest in its first week.

Potential Bitcoin ETF issuers are already engaging in a marketing war over their respective products, with multiple Bitcoin spot ETF ads having now aired.

Galaxy Digital CEO Mike Novogratz, also in the race, stated this August that asset managers were going to “fight like cats and dogs to win market share” once the ETFs get approved.

Crypto market movers

  • Bitcoin traded about $42,865, up 0.5% since Thursday.
  • Ethereum is at $2,368, down 0.4% in the same period.
  • Solana is up 10%.

What we’re reading

Tom Carreras is a Markets Correspondent at DL News. Got a tip about Bitcoin ETFs? Reach out at tcarreras@dlnews.com