ARK Invest is teaming up with 21shares to launch new crypto-focused ETFs. ARK Invest Founder and CEO Cathie Wood says the partnership made sense given how complementary the firms' areas of expertise are. Wood says that bitcoin (BTC-USD) is "the first global, digital, private rules based monetary system in history" adding that global monetary policy is "unhinged, it's not hinged to anything except human decision-making" and that "the monetary system is bitcoin."
Ark is one of the several firm trying to launch a spot bitcoin ETF. Wood says "something has changed," noting that the Securities and Exchange Commission has responded to their application with questions instead of just rejecting it. Wood believes this means that the odds of approval have gone up. Overall, Wood is still bull on bitcoin, saying her base case for the cryptocurrency is $600,000-$650,000. However, she thinks it could go higher, given the currency's scarcity and the potential for more institutional investment if a spot bitcoin ETF is approved.
Click here to see the full interview with ARK Invest's Cathie Wood.
Video Transcript
JULIE HYMAN: One of the assets that perhaps surprisingly was not rising today was bitcoin, even though it has rallied as of late today, falling by some 3.4%. And it's on this day that Cathie Wood announced or ARK Invest announced in cooperation with 21shares. It's going to be launching a new suite of digital asset ETFs. They will be actively managed.
And I had the chance to talk to her about digital assets, broadly about these products specifically, and, of course, about her still bullish stance on cryptocurrency.
CATHIE WOOD: This is the first global, digital, private, rules-based monetary system in history. It's a very big idea. When we wrote the paper in collaboration with Art Laffer-- you know Art Laffer supply-side economics, Laffer curve-- he said, I've been waiting for this since they closed the gold window in 1971. So he's been waiting 50 years for this, right? And he's so excited about everything crypto, but especially bitcoin, because he believes, and it is true, monetary policy around the world is unhinged. It's not hinged to anything except human decision making.
And this is going to put discipline, rigor back into--
JULIE HYMAN: These particular products you're talking.
CATHIE WOOD: Well, bitcoin is. The monetary system is bitcoin. And so, yes, the-- why now for these? We've been working with 21shares since I met Ophelia at an ETF confab in 2018. They had really just started their business. And I said, you know, we want to move towards crypto. You are completely crypto. They were focused on the infrastructure, the regulations, really blazing a trail. They had to invent things in order to make this happen.
And we knew that was not our core competency. And so we-- but we did start talking. Our core competency is research on disruptive innovation. And they do research. They do deep technical research on the market. Our research is on the disruptive innovation that it represents. And we've just been coming together for five years. It was a natural for us to come together.
They are or 21shares is the largest crypto ETP provider in the world, $1.5 billion. They have 35 different funds. Most of them in Europe in and around Europe. They were looking for a US entry. And we were looking for infrastructure. And, you know, we're just delighted to be partnering with them given how much groundwork they had to lay for this to happen.
JULIE HYMAN: Speaking of groundwork, on another product that you're working on, of course, the spot bitcoin ETF, which you are also partnering with them on. And you've got your filing in. There's a lot of filings in. Every day, seemingly, there is a new rumor about approval of one of these things. What are you hearing from the SEC at this point? Are-- you know, there's a January deadline I know that people have been looking to. How confident are you that you're going to get approval?
CATHIE WOOD: Well, something has changed. So we had put in a number of times a filing. And we were just denied. Never got any questions really, never got any response. This time, this summer, we got questions back from the SEC. Now, normally, when you get questions from the SEC, you're just saying, oh, my goodness. We were thrilled to get questions back, because it means they're engaged now.
Now, we have met a number of the research people at the SEC on the research side. And they are extremely sophisticated. They know what they're talking about. And the level of sophistication of their questions suggested, OK, now they're moving deeply into this. And we answered those questions. We have not heard back. That's a good sign, too. They never tell you that-- tell you that you've satisfied them. But if you don't hear from them, they-- that usually means that you have satisfied the answers to the requests.
So that was new. And we also know that BlackRock got questions. We put our answers in first. I think they have followed. And I'm not sure about anyone else. That was different. And it says, OK, there's movement. And we are the first in line, just because we kept refiling. Others gave up. And so-- but we just kept re filing. We just kept-- and we became first in line. So David against Goliath, right?
And that's January 10th is the final deadline. They've been able to push it. It's a very orchestrated. Push it, push it, but the final, they either approve or deny on January 10th.
JULIE HYMAN: What do you think?
CATHIE WOOD: Well, again, I mentioned something has changed.
JULIE HYMAN: Right.
CATHIE WOOD: That's good. The odds have gone up. There is only one wrinkle just occurred to us in the last couple of days. They will approve a number at once. It won't be just one. That would be choosing a winner given the way ETFs work.
But we know Grayscale wants to convert to an ETF. I don't know how practical that is, or if the SEC will let them, or if they need a special dispensation. I just don't know the rules. Grayscale has said it will sue the SEC again if it denies the conversion. If they were to do that before January 10th, I don't know if that would throw everything up in the air again.
JULIE HYMAN: For the others as well.
CATHIE WOOD: For everyone.
JULIE HYMAN: Right.
CATHIE WOOD: Yeah. I just don't know. I don't know.
JULIE HYMAN: So there's still a lot of unknowns out there. You mentioned you guys bought into bitcoin at 250 way back when. So the return from 250 to 35, 36 looks pretty good. But it's not 100,000 that I think you and I have talked about at various points or even loftier numbers. Where are we in that cycle?
CATHIE WOOD: I think-- so if we look at the reasons that bitcoin will scale, so our base case is today 600 to 650-- $650,000, and our bull case, based on the scarcity that is now developing, we're at roughly 19.5 million bitcoin out there, there will only be 21 million ever. And we do believe that.
We think that institutions, if the SEC blesses a bitcoin ETF, institutions will feel like the coast is clear for them to pursue. And we know a lot of institutions have been researching crypto assets for a while and do agree that it is a new asset class. Bitcoin was the first in a new asset class. We wrote-- we wrote a paper in 2000-- I think it was '16, ringing the bell for a new asset class. And our director of digital assets said to me, do you realize that happened today? We rang the bell for a new asset class. I said, oh, I didn't make that connection.
Anyway, so institutions understand when there is a new asset class, it's-- there's an opportunity to diversify and increase returns per unit of risk. That's very important. They've also learned that bitcoin, in particular, can be a hedge against both inflation and deflation.