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Why Crypto Bull Cathie Wood Skipped the New Bitcoin ETF

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Investors may have traded a near-record amount of the new Bitcoin futures ETF on its first day, but prominent crypto bull Cathie Wood wasn’t among them.

Her team did not buy into the ProShares Bitcoin Strategy ETF “and one of the reasons is we’re looking at this very carefully, the futures,” Wood said at the Milken Institute Global Conference on Tuesday as part of an interview with Bloomberg’s Carol Massar.

“There are some tax ramifications we’d like to understand more having to do with contango, which is contango versus more normal backwardation. So not yet,” she added.

Futures typically trade at a premium to spot, a development referred to as contango. Contango and backwardation are terms for curve structures that map traders’ guesses about what a given contract could be worth in the future.

Contango means it’s upward sloping, while backwardation means downward.

ProShares’ Bitcoin Debut

The fund from ProShares, which trades under the ticker BITO, is based on Bitcoin futures and is the first of its kind in the U.S.

It debuted as the second-most heavily traded fund on record. Well over 24 million shares of the ETF changed hands Tuesday, data compiled by Bloomberg show, with assets in the fund closing the first day at around $570 million, according to ProShares.

Investors are anticipating that more funds based on Bitcoin futures could start to trade in the U.S. soon.

Wood recently joined the slate of Wall Street players hoping to launch such an ETF. And according to a June filing, she also lent her firm’s name to an application that would track the performance of the world’s largest cryptocurrency as measured by the S&P Bitcoin Index.

Wood has been bullish on Bitcoin for some time. In May, she said she expected the cryptocurrency to reach a price of $500,000. At the Milken conference Tuesday, she said she got involved when the crypto’s market value hovered around $6 billion — it’s grown to more than $1 trillion currently.

Wood’s Tech Focus

Meanwhile, Wood said she wants her clients to be exposed to the next Faang stocks, a cohort that typically refers to the market’s stalwarts: Facebook Inc., Inc., Apple Inc., Microsoft Corp. and Google parent Alphabet Inc. Such companies are well understood and well-owned right now, Wood said. Instead, she’s looking for the next group of star performers.

Wood’s base case on shares of Tesla Inc. is $3,000. The stock is trading around $860. “Tesla was our first proof of concept,” she said. “We saw Elon Musk, magnificent things happening,” she said, adding that it’s been an easy investment all along because she believed in the company.

Wood in 2020 gained notoriety as a star stock-picker thanks to a stellar year for many of her funds, including her flagship ARK Innovation ETF (ticker ARKK) which rose roughly 150% in that span. It’s down 23% since a February peak this year.

When asked about the fund’s flagging 2021 performance, Wood said, “it’s not tougher. We expected it and wanted it, actually.”

She added: “Not that we wanted our stocks to go down, but what we didn’t want was another bubble, which was when the market became more and more narrowly focused on just one group. Instead what happened, energy is up 50% this year, financials are up 30% and, oh by the way, we think those two sectors are going to be the most disrupted of any.”

Wood added that there’s been a rotation into value stocks amid fears of inflation and higher interest rates. “Therefore, there’s been a broadening out of this bull market,” she said. “I think we’re in a very strong bull market — very strong bull market.”

  (Photo courtesy of ARK Invest)

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