ARK Investment Management LLC, which manages the first exchange-traded fund (EFT) with exposure to cryptocurrency, has almost doubled its money since September after investing in bitcoin, thanks to the virtual currency’s recent price surge, according to Bloomberg News. The overall fund has gained 15% this year, which represents more than 98% of the unleveraged ETFs in the U.S.
Cathie Wood, who founded New York City-based ARK in January of 2014, said Greece, China’s devaluation and a U.S. interest rate increase drove price swings resulting in a capital exodus from emerging markets, elevating bitcoin.
Ashraf Laidi, CEO at Intermarket Strategy Ltd. in London, said volatility in stocks, fixed income and currencies has eroded investment funds’ performance this year. He noted that China’s devaluation, the risk of Greece’s exit that subsided but could return, and the weak outlook of Fed rate hikes all raised the volatility risk. All of these factors enhance bitcoin’s credibility.
ETFs cannot purchase bitcoin directly. ARK added 1,100 shares ($33,000 USD) in Bitcoin Investment Trust to its Web X.0 fund in September. ARK has increased those holdings to a total of 3,786 shares. As of Thursday, those shares were worth $193,086.
Wood said she is not concerned about cryptocurrency’s volatility. Bitcoin’s volatility stabilized for almost 12 months in the $200 to $300 range following the “near death experience” with Mt. Gox. Investors have more comfort that it is not going to implode, she said.
Cryptocurrencies are the second smallest portion of ARK’s Web X.0 fund. Among the 12 fund sectors listed on the company’s website as of Sept. 30, 2015, ,cloud computing represents 28%, followed by big data, 14%, Internet of Things, 14%, social media, 10%, devices and gateways, 9%, e-commerce, 9%, media ecosystem, 7%, health care, 5%, point of sale, 2%, connectiv
ity, 2%, cryptocurrencies, 0.5%, and sharing economy, 0.2%.
The fund is concentrated in the information technology sector and includes issuers that have their principal business activities in the Internet information provider and catalog and mail order house industry, the company notes.
Images from Shutterstock and ARK Invest.