According to reports, the Grayscale Bitcoin Trust, a digital currency investment product, has emerged as the top-performing ETF on ARK’s list in Q2 2023. According to ARK’s most recent quarterly ETF report, released on July 19, GBTC was one of the leading contributors to the success of its ARK Next Generation Internet exchange-traded fund (ARKW) in the second quarter.
Grayscale Bitcoin Trust shines in Q2 2023 ETFs
According to the data, GBTC was one of the top five contributors to ARKW’s 9.1% growth in the second quarter, along with Tesla, Shopify, Unity Software, and Draftkings. According to the report, Grayscale accounted for 108 basis points at ARKW, while the leading asset, Tesla, accounted for 232 basis points.
ARKW is one of ARK’s leading ETFs in terms of year-to-date gains, up about 50% through June 30. In Q2, ARKW had about 20% of assets connected to cloud computing and around 19% related to blockchain as part of its strategy to capture internet-based products and services, cloud computing, artificial intelligence, and e-commerce.
Despite being the top performer for ARKW in Q2 2023, Grayscale BTC is behind Coinbase in terms of asset allocation at ARKW. Grayscale accounted for nearly as much as ARKW’s Tesla holdings, or slightly more than 7.5%, while Coinbase was the most allocated asset, accounting for nearly 9%.
Other top assets by allocation include Jack Dorsey’s crypto-related platform Block, which accounted for 7% of ARKW’s total assets in Q2 and is ranked fourth. Block, unlike GBTC, was among the top five worst performers for ARKW in Q2, dragging the stock down 30 basis points.
ARK’s most recent quarterly report does not include the company’s most recent substantial sales of Coinbase stock. As of mid-July, when Coinbase shares were trading above $90, ARK was actively collecting profits, selling nearly one million Coinbase shares worth approximately $97 million.
Despite selling the shares, ARK CEO Wood remains enthusiastic about Coinbase, owing primarily to Ripple’s recent legal advances in the long-running US Securities and Exchange Commission litigation. On July 17, Wood maintained her positive outlook on Bitcoin, saying that it will one day reach $1.5 million per coin.
GBTC’s current market state
The Grayscale Bitcoin Trust (GBTC) is a crypto-investing titan with a market valuation of nearly $14 billion. For more than two years, the fund traded at an ever-widening discount to the value of the bitcoin it holds, but this has reversed dramatically in recent weeks, resulting in significant returns for investors.
The trust’s structure is of great importance. It’s a closed-end fund (CEF), which is a different product than the exchange-traded funds (ETFs) that have exploded in popularity in recent years. Both are essentially vaults that store a large number of assets, such as stocks or, in the case of the Grayscale trust, billions of dollars in value of bitcoin (BTC).
Since February 2021, GBTC has traded at a discount to its bitcoin holdings. In the year following the FTX explosion, the situation degraded dramatically. In November, the Genesis lending arm stopped consumer withdrawals, and the GBTC discount rose to 43%.
Many trading firms were Genesis customers, and some of them may have wagered on a narrowing discount, which may explain why Genesis’ difficulties harmed GBTC. Losing access to their funds could have rendered these trading strategies ineffective.
In December, the GBTC discount reached a record 50% after the SEC reaffirmed the reasons for denying Grayscale’s application to convert the trust into an ETF.
According to analysts, the possibility that the SEC will authorize the conversion of GBTC into an ETF is contributing to the narrowing discount. Grayscale stated in April that it anticipates learning by the end of the third quarter if it will be permitted to convert GBTC into an ETF.
