Cryptocurrencies like bitcoin have had a difficult year, falling from the forefront of a burgeoning digital assets space into an area of serious uncertainty. But in a market defined by a high level of uncertainty and volatility driven by geopolitical and inflationary risk, bitcoin has become a low-vol play accessible in an active, tech-oriented wrapper, the ARK Next Generation Internet ETF (ARKW).
Bitcoin’s volatility, as tracked by BitMEX’s BVOL Index, has fallen from 83% in mid-June to a remarkable 16.5% this week. While the low volatility in bitcoin can be attributed partly to a decline in trading volume over the last month, it presents a low-vol opportunity compared to the VIX, which sat at 29.83 at close on Monday compared to 23.36 at the start of August.
While bitcoin may be at a low point, the introduction of crypto ETPs to the market as a target for bitcoin funds underscores faith in the future of the space, with bitcoin as the flagship. Should the price of bitcoin hit approximately $23,000, it could have even further upside, according to crypto bulls.
ARKW is just one of four ETFs with exposure to the Grayscale Bitcoin Investment Trust (GBTC), with ARKW holding the second-highest weight to the Trust at 5.72%. While 2022 has shown that bitcoin does not hedge against inflation or the broader market on its own, ARKW combines its bitcoin holding with online companies that fit ARK Invest’s approach to innovative firms.
ARKW takes an actively managed approach in targeting cloud computing, e-commerce, big data, artificial intelligence, and financial technology. The strategy’s top holdings include Zoom Video Communications Inc. (ZM), Tesla Inc., (TSLA), Coinbase Global, Inc., (COIN), and Roku, Inc. (ROKU) at 8.4%, 8.3%, 7%, and 6.3% respectively.
The ETF has seen $7.1 million in net flows over the last five days, charging 83 basis points to investors. With several major tech firms set to report earnings this week, ARKW presents a rare combination of low-vol holdings like bitcoin and upside via growth stocks.
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