ARKW Is Not A De Facto Bitcoin ETF

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ARKW Is Not A De Facto Bitcoin ETF

seekingalpha2021-04-22

Summary ARKW may scare potential investors away due to its excess direct/indirect exposure to Bitcoin amid fear of becoming a de facto Bitcoin ETF like MicroStrategy, but data showed otherwise. ...

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BigTee
·2021-04-22
Pog
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geraldwwx
·2021-04-22
Bullish
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SHELBY
·2021-04-22
Like and comment
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mwsi7128
·2021-04-22
Wow 20% in bitcoin. That's too much risk !
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- Karlok:
  Nice
  2021-04-22
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Cents
·2021-04-22
Who's into BITC here?
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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nARKW Is Not A De Facto Bitcoin ETF\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-22 20:26 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420485-ark-next-generation-internet-etf-arkw-is-not-de-facto-bitcoin-etf><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nARKW may scare potential investors away due to its excess direct/indirect exposure to Bitcoin amid fear of becoming a de facto Bitcoin ETF like MicroStrategy, but data showed otherwise.\n...</p>\n\n<a href=\"https://seekingalpha.com/article/4420485-ark-next-generation-internet-etf-arkw-is-not-de-facto-bitcoin-etf\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"COIN","symbol_name":"Coinbase Global, Inc.","start_time":0,"source_url":"https://seekingalpha.com/article/4420485-ark-next-generation-internet-etf-arkw-is-not-de-facto-bitcoin-etf","article_id":"1113952804","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1113952804","pubTimestamp":1619094369,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nARKW may scare potential investors away due to its excess direct/indirect exposure to Bitco","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"COIN":"Coinbase Global, Inc.","SQ":"Block","PYPL":"PayPal","ARKW":"ARK Next Generation Internation ETF","GBTC":"Grayscale Bitcoin Trust","TSLA":"特斯拉"},"translate_title":"ARKW不是事实上的比特币ETF","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ARKW":0.9,"COIN":0.9,"BTCmain":0.9,"XBTmain":0.9,"GBTC":0.9,"PYPL":0.9,"SQ":0.9,"TSLA":0.9},"content_text":"Summary\n\nARKW may scare potential investors away due to its excess direct/indirect exposure to Bitcoin amid fear of becoming a de facto Bitcoin ETF like MicroStrategy, but data showed otherwise.\nCorrelation data shows that the correlation between ARKW and Bitcoin is time-varying where there are even instances of negative correlation despite having more than 20% direct or indirect Bitcoin exposure.\nIn contrary to popular belief, the S&P 500 and ARK's ETFs with and without direct and indirect exposures to Bitcoin or Companies with Bitcoin are similarly correlated to Bitcoin.\nCorrelation data from 2020 and 2021 indicate the correlation of S&P 500 and ARK's ETFs toward Bitcoin is weak or borderline medium at best.\nARKW's exposure to Bitcoin hasn’t gone out of hand and showed no change in dynamics, this is important such that we don’t refrain from investing in ARK's best performing fund.\n\nPhoto by Klaus Vedfelt/DigitalVision via Getty Images\nIntroduction\nARK Next Generation Internet ETF (ARKW) is ARK's historically best-performing fund, as evident from the chart below, even outperforming ARK's flagship fund (ARKK). Perhaps, Cathie Wood's vision for the future is more accurate than many thought. Society has indeed gone through significant shifts towards cloud computing, mobile enablement, new payment methods, internet of things penetration, big data, etc. True enough, companies held in ARKW enjoyed tremendous growth.\nChart 1: Performance of ARK's 5 ETFs and the S&P 500.\nSource: Author, TradingView\nARK has always been bullish on Bitcoin, and ARKW has the most exposure to Bitcoin among all the other ARK's ETFs. ARK first invested in Bitcoin via Grayscale Bitcoin Trust (OTC:GBTC) in 2015, even when Bitcoin was below $250. It seems fitting for a fund known as \"Next Generation Internet\" to get into Bitcoin since Bitcoin (BTC-USD) is dubbed as the \"money of the internet.\" Since then, several ARKW's top holdings have also got involved in Bitcoin, such as Tesla (TSLA) and Square (SQ). Currently, at least 20% of ARKW's holdings are directly or indirectly exposed to Bitcoin.\nThis may be quite uncomfortable for many investors amid the potential of becoming another de facto Bitcoin ETF like MicroStrategy (MSTR), especially to those who do not acknowledge Bitcoin. With Coinbase (COIN) being the latest addition into ARKW, has ARK's exposure to Bitcoin gone way out of hand?\nMicroStrategy, the de facto Bitcoin ETF\nMicroStrategy first added Bitcoin in August 2020 and has added a total of $2bn worth of Bitcoin to its balance sheet over the following months. Since then, MicroStrategy's share price movement is increasingly more correlated to Bitcoin. This relationship is evident when put under the lens of a rolling correlation.\nBy referring to Chart 2, we can observe that MSTR's correlation to Bitcoin is increasing as the company continued to add more Bitcoin into its balance sheet.\nChart 2: 30-Day Rolling Correlation between MSTR and Bitcoin\nSource: Author, raw data sourced from Yahoo Finance\nFor this reason, I was anxious about ARKW when Tesla and Square, which are ARKW's biggest holding, started to hold Bitcoin back in 2020. But I could no longer turn a blind eye when ARKW added Coinbase into its holdings. I asked myself, \"Is ARKW becoming another de facto Bitcoin ETF?\".\nThe answer will surprise you.\nHow correlated is ARKW to Bitcoin?\nTo examine this, let's analyze ARKW's correlation in three ways: 30-day rolling correlation, correlation in 2020, and correlation in 2021.\nChart 3 tells us that the correlation between Bitcoin and ARKW is time-varying. Although ARKW has a lot of exposure to Bitcoin, its correlation is not constant, and ARKW doesn't necessarily strongly correlate with Bitcoin.\nChart 3: 30-Day Rolling Correlation Between ARKW and Bitcoin\nSource: Author, raw data sourced from Yahoo Finance\nWhen we put the correlation of ARKW and MSTR to Bitcoin together in Chart 4, we can observe a very distinct relationship. We can observe that ARKW is not that correlated to Bitcoin when compared to MSTR. ARKW's time-varying correlation fluctuates wildly, but MSTR's is steadily increasing.\nChart 4: 30-Day Rolling Correlation of ARKW and MSTR to Bitcoin.\nSource: Author, raw data sourced from Yahoo Finance\nFigure 1 (marked by red boxes) indicates the correlation between ARKW and Bitcoin is 29% and 31% in 2020 and 2021, respectively. Table 1 implies the correlation between ARKW and Bitcoin is weak or borderline medium at best.\nOn the other hand, MSTR's correlation to Bitcoin was 35% in 2020 and a whopping 65% in 2021. MSTR's correlation to Bitcoin was moderate in 2020 because it only started holding Bitcoin after August 2020. As a result, MSTR's correlation to Bitcoin in 2021 YTD became positively strong.\nTable 1: Correlation Benchmarks\nSource: Laerd Statistics\nFigure 1: Correlation Matrix for ARKW, MSTR, and Bitcoin in 2020 and 2021\nSource: Author, raw data sourced from Yahoo Finance\nIn summary, this information tells us the following:\n\nCorrelation between ARKW and Bitcoin is time-varying and can even be negative despite more than 20% exposure to Bitcoin and companies holding Bitcoin, hence no convergence in price movements. In other words, ARKW is not becoming a de facto Bitcoin ETF.\nIn contrast, MSTR's correlation to Bitcoin has been steadily increasing, showing convergence in price movements. Hence, the proposition that MSTR is becoming a de facto Bitcoin ETF cannot be strongly refuted.\nCorrelation data from 2020 and 2021 indicate the correlation between Bitcoin and ARKW is weak at best. On the other hand, the correlation data also indicated a strong correlation between MSTR and Bitcoin.\n\nYou might be thinking, 30% correlation is pretty huge. Let's now analyze this with a broader context.\nHow are the S&P 500 and other ARK's ETFs correlated to Bitcoin?\nChart 5 shows us the 30-day rolling correlation of the S&P 500, 5 ARK ETFs, and MSTR to Bitcoin. According to the chart, the time-varying correlation between MSTR and Bitcoin significantly differs from the correlations of the S&P 500 and ARK's ETFs to Bitcoin.\nThe correlation of the S&P 500 and 5 ARK's ETFs (including ARKW) to Bitcoin is actually very similar. To our surprise, the correlation between ARKW and Bitcoin doesn't seem all too different than the correlation of the S&P 500 and the other ARK ETFs to Bitcoin.\nThis is interesting because the S&P 500 and ARKG are still similarly correlated to Bitcoin despite having minimal to no Bitcoin exposure. When ARKW is strongly correlated to Bitcoin, it does it together with the S&P 500 and the other ARK ETFs. It is also interesting to observe instances where the S&P 500 and ARK's ETF are uniformly negatively correlated to Bitcoin. This shows that ARKW's excess Bitcoin-related holdings have not changed much of the fund's dynamics.\nOn the other hand, MSTR's correlation to Bitcoin was quite similar to ARK ETFs and the S&P 500 prior to adding Bitcoin to its balance sheet. However, that dynamic has drastically changed since adding Bitcoin onto its balance sheet (marked by a vertical line on Chart 5). The most notable instance is when the time-varying correlation between MSTR and Bitcoin is strongly positive when the correlations of ARK ETFs and the S&P 500 to Bitcoin are uniformly negative.\nChart 5: 30-Day Rolling Correlation Between Assets\nSource: Author, raw data sourced from Yahoo Finance\nFigure 2 shows us the correlation matrix between Bitcoin, the S&P 500, ARK's ETFs, and MSTR. The red boxes in Figure 2 contain the correlations to Bitcoin in 2020 and 2021.\nIt can be observed that the S&P 500's correlation to Bitcoin is not different compared to ARK ETFs with exposures to Bitcoin. Their correlations are weak or borderline medium at best. Even ARKG with no Bitcoin exposure is more correlated than ARKW. However, the correlation between MSTR and Bitcoin is positively strong and notably higher than the rest.\nFigure 2: 2020 and 2021 Correlation Matrix\nSource: Author, raw data sourced from Yahoo Finance\nIn summary, this further information tells us the following:\n\nMSTR's correlation to Bitcoin drastically changed after adding Bitcoin to its balance sheet. As a result, MSTR's correlation to Bitcoin became positively strong.\nOn the other hand, despite ARKW having more than 20% direct and indirect exposure to Bitcoin, the time-varying correlation between Bitcoin and ARKW is pretty much indifferent to the time-varying correlation between Bitcoin and other funds such as the S&P 500 and other ARK's ETFs. Therefore, we can safely suggest with evidence that ARKW's increased exposure to Bitcoin did not change its dynamics, and ARKW is not becoming a de facto Bitcoin ETF like MSTR.\n\nConclusion\nSo, has ARKW's exposure to Bitcoin gone way out of hand?\nBased on the results from the analysis above, we can safely say no, ARKW's exposure to Bitcoin has not gone out of hand, contrary to popular belief. Although correlation doesn't reflect causality, we could observe that the time-varying correlations between the funds and Bitcoin are moving in tandem, implying ARKW's dynamics are still intact, unlike MSTR.\nI had a growing fear that ARKW is becoming a de facto Bitcoin ETF like MicroStrategy ever since ARKW's holdings (Tesla and Square) are slowly adding more Bitcoins to their balance sheet and the latest addition of Coinbase into ARKW's holdings. Contrary to popular beliefs that ARKW is more correlated to Bitcoin than other funds with less exposure, data showed otherwise.\nThis article hopes to clear this misconception that ARKW's exposure to Bitcoin has gone out of hand and changed the fund's dynamics. This is a relief for us and is crucial for you because ARKW is ARK's historically best performing fund that outperforms even its flagship fund, ARKK. If you shy away from ARKW due to its excess Bitcoin exposure, you might lose your opportunity to invest in ARKW, ARK's historically best performing fund.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":376168578,"gmtCreate":1619098400694,"gmtModify":1704719608528,"author":{"id":"3577366619406435","authorId":"3577366619406435","authorIdStr":"3577366619406435","name":"BigTee","avatar":"https://static.tigerbbs.com/a3be79eaf5e1578279874dd8445c143d","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3577366619406435"},"htmlText":"Pog","listText":"Pog","text":"Pog","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376168578","repostId":1113952804,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376134983,"gmtCreate":1619096907242,"gmtModify":1704719572486,"author":{"id":"3555322280934257","authorId":"3555322280934257","authorIdStr":"3555322280934257","name":"geraldwwx","avatar":"https://static.tigerbbs.com/bccdb31724278699a26408ea1426d1d2","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3555322280934257"},"htmlText":"Bullish&nbsp;","listText":"Bullish&nbsp;","text":"Bullish","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376134983","repostId":1113952804,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376192385,"gmtCreate":1619096026247,"gmtModify":1704719556604,"author":{"id":"3574130506412388","authorId":"3574130506412388","authorIdStr":"3574130506412388","name":"SHELBY","avatar":"https://static.tigerbbs.com/8ea388783a3408018293b98b9d8e4c4a","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3574130506412388"},"htmlText":"Like and comment&nbsp;","listText":"Like and comment&nbsp;","text":"Like and comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376192385","repostId":1113952804,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376199015,"gmtCreate":1619095700137,"gmtModify":1704719548345,"author":{"id":"3577516504779986","authorId":"3577516504779986","authorIdStr":"3577516504779986","name":"mwsi7128","avatar":"https://static.tigerbbs.com/2de12058e4995503d289303fb0b984fc","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":6,"crmLevelSwitch":0,"idStr":"3577516504779986"},"htmlText":"Wow 20% in bitcoin. That's too much risk !","listText":"Wow 20% in bitcoin. That's too much risk !","text":"Wow 20% in bitcoin. That's too much risk !","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/376199015","repostId":1113952804,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4103659,"gmtCreate":1619096026806,"gmtModify":1680785129504,"authorId":3575076380849834,"author":{"id":3575076380849834,"authorId":3575076380849834,"name":"Karlok","avatar":"https://static.tigerbbs.com/0f1696696cc5642431fc179f63d9df7a","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":376199015,"type":1,"supId":0,"prevId":0,"content":"Nice","text":"Nice","html":"Nice"}],"langContent":"EN"},{"id":376101178,"gmtCreate":1619095099994,"gmtModify":1704719537239,"author":{"id":"3582186328332132","authorId":"3582186328332132","authorIdStr":"3582186328332132","name":"Cents","avatar":"https://static.tigerbbs.com/9aeb5ea643c232ad183cafe1da096cf9","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3582186328332132"},"htmlText":"Who's into BITC here?","listText":"Who's into BITC here?","text":"Who's into BITC here?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376101178","repostId":1113952804,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":23,"commentSize":5,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}