Who will be the first to pass the Bitcoin spot ETF? Is Ark selling off GBTC a bearish signal for Grayscale?

Bloomberg ETF analyst Eric Balchunas analyzed the holdings of Ark Invest's ARKW fund and found that Ark has increased its weighting in Coinbase stock (COIN) while reducing its allocation to Grayscale Bitcoin Trust (GBTC). This comes at a time when there is widespread anticipation for the approval of a Bitcoin spot ETF in January next year. What are the reasons and strategies behind Ark's decision to sell off GBTC?

What is Ark Invest planning with the oversold GBTC?

Bloomberg ETF analyst Eric Balchunas analyzed the holdings of Ark Invest's ARKW fund and found that Ark recently increased its weightage in Coinbase (COIN) stock while decreasing the proportion of Grayscale Bitcoin Trust (GBTC). Typically, GBTC accounts for 9-11% of their fund's weightage, but now it has dropped to 5.5%.

This is not a typical rebalancing, and Balchunas speculates:

They are maintaining the beta coefficient of Bitcoin by "buying COIN, selling GBTC" in anticipation of the launch of their Bitcoin spot ARKB.

Note: Beta coefficient is an indicator that measures the systematic risk of a product or investment portfolio, used to evaluate its volatility compared to the overall market.

Adam Cochran, a venture partner, also discussed this with Ark Invest, noting that while others are transitioning to cash mode, Grayscale remains in physical mode. Does this mean Grayscale will be approved later than other asset management companies?

Balchunas agrees:

Grayscale may have given up on the first round of approvals and is hoping for approval in the second round with a physical model!

Who might appear in the first wave of approvals?

Bloomberg ETF analyst Eric Balchunas previously stated that the SEC's preference for cash mode means only ETF issuers can handle BTC, not registered broker-dealers. They may also be unwilling to let unregistered broker-dealer subsidiaries handle it because they are not registered. The fact that various asset management companies have been revising their S-1 forms also indicates that this situation seems unstoppable!

Yesterday, Fox Business reporter Eleanor Terrett also quoted insiders as saying that the SEC requested the removal of "physical" from the application form, confirming that everyone can only use the "cash" mode.

According to a tweet from Bloomberg analyst James Seyffart, BlackRock, Ark Invest, Valkyrie, Bitwise, Invesco, Hashdex, and others have submitted amendments that state creation and redemption can only be done in cash. If the SEC only wishes to approve cash-based ETFs at the moment, it is not difficult to see from the table below who has the opportunity to be the first in the next approval window in January!