#398: Spot Bitcoin ETFs Have Launched, & More

Last week, bitcoin hit a significant milestone as the U.S. Securities and Exchange Commission (SEC) approved[i] the registration applications of eleven Spot Bitcoin ETFs. The launch of these funds underscores bitcoin’s remarkable journey from niche digital money to a regulated new asset class. As early as 2015, ARK published a white paper on bitcoin, Bitcoin: A Disruptive Currency,[ii] and provided clients exposure to bitcoin.

Spot Bitcoin ETFs should prove significant for both bitcoin and traditional financial markets. First, a spot ETF provides a direct way for institutional and retail investors to gain exposure to bitcoin without dealing with the complexities of self-custody and other onboarding requirements. Second, spot ETFs legitimize bitcoin as an institutional asset, which should catalyze bitcoin’s acceptance and integration into traditional financial systems. Finally, spot ETFs should increase bitcoin’s liquidity and trading volumes significantly.

On their first day of trading, the approved ETFs generated $4.6 billion in total of volume,[iii] or $2.3 billion excluding GBTC which outflowed. Net inflows excluding GBTC totaled $820 million.[iv] Volumes and flows were higher for the Spot Bitcoin ETF complex than for any ETF launch of an asset.[v] Attracting positive media coverage, the ETFs operated smoothly, with no circuit breakers or halts and no issues with market structure.

Having researched Bitcoin deeply from a number of vantage points since 2015, we believe bitcoin is a public good, a financial superhighway that should preserve or enhance purchasing power and provide access to financial services for billions of people around the world.

Now that Spot Bitcoin ETFs have launched, the next major catalyst, in our view, will be the highly anticipated “halving event”[vi] —set to occur April 2024—during which the growth in bitcoin’s supply will be cut in half, from 1.8% per year to ~0.9%, dropping below gold’s ~1% long-term average supply growth. Important to note, the halving will reinforce Bitcoin’s mathematically metered monetary policy that ultimately will cap the number of bitcoin minted at 21 million, only ~7% higher than the 19.6 million outstanding today.

Last week, several announcements at JP Morgan’s Healthcare Conference ("JPM") bolstered our view that catalysts will cause a rebound in the biotech equity market, among them mergers and acquisitions (M&A) activity, scientific breakthroughs, and more regulatory clarity. True to this conference’s history, M&A activity captured many headlines.

Notable M&A announcements during JPM included: Johnson & Johnson’s acquisition[vii] of Ambrx Biopharma, a synthetic biology company focused on antibody drug conjugates, for $2 billion; Boston Scientific’s acquisition[viii] of Axonics, a bladder and bowel control company, for $3.7 billion; and Merck’s acquisition[ix] of Harpoon Therapeutics, a T-Cell Immunotherapy company, for $680 million.

For perspective, according to journalists at BioPharma Dive,[x] the number of global biotech acquisitions valued more than $1B increased 36% from 2022 to 2023, as shown below.

Source: ARK Investment Management LLC, 2024, based on data from Pagliarulo and Bell as of January 8, 2024.[xi] For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Past performance is not indicative of future results.

Important to small biotech companies developing clinical assets, acquisitions should speed them to market, benefit patients, and cause a resurgence of activity in the capital markets. They also should help companies bridge the drop in revenue and earnings associated with the loss of exclusivity as patents expire and the Inflation Reduction Act continues to play out. In our view, news from the JPM conference suggests that the equity bear market in biotech will change course.

Last week, AI startup Rabbit released its first consumer product, Rabbit R1, as shown below.

Source: Rabbit. For illustrative purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security.

Central to R1’s appeal is its Large Action Model (LAM),[xii] a new foundation model that leapfrogs the simple conversational capabilities of traditional chatbots like ChatGPT by enabling specific, app-based tasks.

LAM navigates interactive application interfaces, learns and adapts to user habits, and evolves into a personalized tool surpassing the functionality of text-based chatbots that provide information and answer queries. With LAM, the Rabbit R1 can manage tasks directly in applications—booking hotels and rearranging schedules, for instance, based on unique user patterns and preferences.

In our view, the leap in Rabbit-R1’s AI functionality—from informational assistant to an essential hands-on digital tool—could be a game-changer for AI-centric hardware, meshing AI seamlessly into the app economy with voice commands for search and discovery.

[i] U.S. Securities and Exchange Commission. 2024. “Statement on the Approval of Spot Bitcoin Exchange-Traded Products.”

[ii] ARK Investment Management LLC. 2015. “Bitcoin: A Disruptive Currency.”

[iii] Lang, H. et al. 2024. “US bitcoin ETFs see $4.6 billion in volume in first day of trading.” Reuters.

[iv] Balchunas, E. 2024a. “Latest: With two days in the books…” X.

[v] Balchunas, E. 2024b. “Home Stretch: $IBIT has just passed $1b in volume today…” X.

[vi] Whittaker, M. 2024. “Bitcoin Halving 2024: How It Works And Why It Matters.” Forbes Advisor.

[vii] Yahoo Finance Businesswire. 2024. “Johnson & Johnson to Acquire Ambrx, Advancing Next Generation Antibody Drug Conjugates to Transform the Treatment of Cancer.”

[viii] Businesswire. 2024. “Axonics Announces Definitive Agreement to be Acquired by Boston Scientific.”

[ix] Merck. 2024. “Merck to Acquire Harpoon Therapeutics, Further Diversifying Oncology Pipeline.”

[x] Pagliarulo, N. and Bell, J. 2024. “Biotech M&A is picking back up. Here are the latest deals.” BioPharma Dive.

[xi] Ibid.

[xii] Rabbit Research Team. 2024. “Learning Human Actions on Computer Applications.”