Introduction

The cryptocurrency market has been growing rapidly in the past decade, attracting investors from all walks of life. However, investing in crypto assets can be challenging for many reasons, such as volatility, security, regulation, and accessibility. That's why some innovative firms have been developing new products that aim to make crypto investing easier, safer, and more mainstream. Among them, Ark Invest and 21Shares are two leading players that have recently launched a suite of crypto exchange-traded funds (ETFs) that offer exposure to digital assets through futures contracts.

What are crypto ETFs and why do they matter?

An ETF is a type of investment fund that tracks the performance of an underlying asset or a basket of assets, such as stocks, bonds, commodities, or currencies. ETFs are traded on stock exchanges, just like regular shares, and offer investors a convenient way to diversify their portfolios and access different markets.

A crypto ETF is an ETF that invests in crypto assets, such as Bitcoin, Ethereum, or other cryptocurrencies. Crypto ETFs can be either spot or futures based. A spot ETF holds the actual crypto assets in custody, while a futures ETF uses derivatives contracts to gain exposure to the price movements of crypto assets.

Crypto ETFs are important for several reasons. First, they provide a regulated and transparent way for investors to access the crypto market, without having to deal with the technical and operational complexities of buying, storing, and securing crypto assets. Second, they offer liquidity and efficiency, as investors can buy and sell crypto ETFs anytime during the trading hours, without having to worry about the availability and speed of crypto exchanges. Third, they lower the barriers to entry and increase the adoption of crypto assets, as investors can use their existing brokerage accounts and platforms to invest in crypto ETFs, without having to create new accounts or wallets.

How Ark Invest and 21Shares are leading the crypto ETF space

Ark Invest and 21Shares are two prominent investment firms that have been at the forefront of the crypto ETF space. Ark Invest is a global asset manager that focuses on disruptive innovation and technology, led by the visionary Cathie Wood. 21Shares is a crypto-focused firm that specializes in creating and managing crypto ETFs and ETPs (exchange-traded products).

On November 14, 2023, Ark Invest and 21Shares jointly announced the launch of five new crypto ETFs, which are the first actively managed crypto ETFs in the US. These ETFs include:

1. ARK 21Shares Active Bitcoin Futures Strategy ETF (ARKA): This ETF invests in Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME), as well as cash and cash equivalents.

2. ARK 21Shares Active Ethereum Futures Strategy ETF (ARKZ): This ETF invests in Ethereum futures contracts traded on the CME, as well as cash and cash equivalents.

3. ARK 21Shares Active Digital Asset Futures Strategy ETF (ARKX): This ETF invests in a diversified portfolio of crypto futures contracts, including Bitcoin, Ethereum, and other cryptocurrencies, as well as cash and cash equivalents.

4. ARK 21Shares Active Digital Asset Equity Strategy ETF (ARKY): This ETF invests in a diversified portfolio of stocks of companies that are involved in the crypto industry, such as mining, exchange, custody, payment, and blockchain technology providers, as well as crypto futures contracts and cash and cash equivalents.

5 ARK 21Shares Active Bitcoin Versus Cash Strategy ETF (ARKB): This ETF invests in a dynamic mix of Bitcoin futures contracts and cash and cash equivalents, depending on the market conditions and the fund's objectives.

These ETFs are listed on the Chicago Board Options Exchange (CBOE) and have an annual management fee of 0.95%. They are actively managed by Ark Invest and 21Shares, who use their proprietary research and quantitative models to optimize the portfolio allocation and risk management.

What are the main features and advantages of Ark Invest and 21Shares' crypto ETFs?

Ark Invest and 21Shares' crypto ETFs have several features and advantages that make them attractive for investors who want to gain exposure to the crypto market. Some of them are:

• Active management: Unlike most crypto ETFs that are passive and track a fixed index or benchmark, Ark Invest and 21Shares' crypto ETFs are active and flexible, meaning that they can adjust their portfolio composition and strategy according to the market conditions and opportunities. This allows them to capture the upside potential and mitigate the downside risk of the crypto market, as well as to take advantage of the inefficiencies and arbitrage opportunities that may arise in the crypto space.

• Futures exposure: Ark Invest and 21Shares' crypto ETFs use futures contracts to gain exposure to the crypto assets, rather than holding them directly. This has several benefits, such as avoiding the custody and security issues that may arise from holding crypto assets, reducing the operational and regulatory costs and risks, and enhancing the liquidity and scalability of the ETFs. Moreover, futures contracts allow the ETFs to access the leverage and hedging tools that are available in the derivatives market, which can enhance their returns and risk management.

• Diversification: Ark Invest and 21Shares' crypto ETFs offer a diversified exposure to the crypto market, not only by investing in different crypto assets, but also by investing in different types of crypto-related instruments, such as futures contracts, stocks, and cash. This can reduce the correlation and volatility of the ETFs, as well as increase their resilience and performance in different market scenarios.

• Innovation: Ark Invest and 21Shares' crypto ETFs are among the first and most innovative crypto ETFs in the US, as they are the first actively managed crypto ETFs, the first crypto ETFs to use futures contracts, and the first crypto ETFs to offer a Bitcoin versus cash strategy. These ETFs reflect the vision and expertise of Ark Invest and 21Shares, who are pioneers and leaders in the crypto and innovation space.

Conclusion

Ark Invest and 21Shares are spearheading the crypto investment evolution with their new suite of crypto ETFs, which offer investors a convenient, regulated, and diversified way to access the crypto market. These ETFs are based on active management, futures exposure, and innovation, which can enhance their returns and risk management, as well as their appeal and adoption. These ETFs are a testament to the growth and maturity of the crypto industry, as well as the potential and opportunity that it offers for investors who want to participate in the digital asset revolution.