Hedge funds bet against Cathie Wood’s pro-Bitcoin ETF

Key Takeaways:

  • ARK Innovation ETF, led by Cathy Wood, is in a tight spot as several hedge funds held put options against it in Q2 2021.
  • What is the objective of the fund and what does it have to do with Bitocoin?

YEREVAN (CoinChapter.com) – Investment veteran Cathy Wood’s ARK Innovation ETF (ARKK), an exchange-traded fund focused on fintech and science innovations, took a hit from several hedge-funds that bet against it in the second quarter of 2021.

ARKK in a tight spot

One of the anti-ARKK wave initiators was Michael Burry, the man behind Scion Asset Management firm. He is widely known for calling the housing market’s collapse, which prompted the 2015 film “The Big Short.” The investor held bearish put options against ARK Innovation ETF, worth almost $31 million against 235,500 shares of the fund.

In hindsight, put options let investors sell shares at a certain price. A put option delivers profits once the stock of the company or fund follows the bearish bet and declines in value.

A cascade of put options followed by other hedge funds like Laurion Capital Management. The said fund held $171 million worth of put options against 1.3 million shares of Ms. Wood’s fund. It is noteworthy that the Laurion Capital hadn’t previously held put options against the ARKK.

Other hedge funds like Moore Capital Management, GoldenTree Asset Management, and Cormorant Asset Management also joined and put bearish options on the fund.

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“Antie Wood” lost no time to respond to Mr. Burry on Twitter, questioning his competence in the fintech field, albeit recognizing his merits.

ARK, Hedge funds bet against Cathie Wood’s pro-Bitcoin ETF

Compared to the S&P 500 (market index tracking the performance of 500 large companies listed on stock exchanges in the United States), the ARK Innovation ETF has underperformed in 2021.

ARKK vs S&P 500. Source: factset.com
ARKK vs. S&P 500. Source: factset.com

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ARK Innovation ETF

The ARK Innovation Fund is focused on “disruptive innovation.” The definition entails introducing a technologically enabled new product or service that has the potential to change the way the world works.

Companies associated with the fund incorporate DNA technologies, industrial innovation, internet services, and financial technologies. The latter refers to the crypto market and various decentralized finance solutions.

The stock price of ARKK has been consolidating since June 30 and has declined by 13 percent since then.

ARK Innovation ETF shares declining. Source: ARKK on TradingView.com
ARK Innovations ETF shares declining. Source: ARKK on TradingView.com

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Cathy Woods is an outspoken Bitcoin supporter, that has voiced her opinion about the future of the financial landscape on various occasions. Back in April, she pinpointed $500,000 to be the target price for Bitcoin by the end of 2021.

Ms. Woods has also filed a request to the Securities and Exchange Commission (SEC) to approve a Bitcoin ETF. The law enforcement agency has yet to reply. A bitcoin ETF in the United States could benefit retail investors and allow them to gain exposure to the flagship cryptocurrency without going through extensive purchasing and securing it.

However, the SEC has avoided granting Bitcoin ETF permissions in the past. Hester Pierce, a pro-Bitcoin commissioner at the agency, commented on the situation.

My view has been that we’re overdue on approving one of these things. I also think we’ve dug ourselves into a bit of a difficult hole by setting standards for approval that are difficult to figure out how to satisfy.

said the commissioner

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