In a strategic move ahead of a key deadline, Cathie Wood's ARK Next Generation Internet ETF has sold its entire holdings of Grayscale Bitcoin Trust amidst uncertainty surrounding the trust's conversion to an ETF.

On Wednesday, the ETF sold its remaining 2.25 million shares of the Grayscale Bitcoin Trust and instead purchased 4.32 million shares of ProShares Bitcoin Strategy ETF, which is based on bitcoin futures. This decision comes as the U.S. Securities and Exchange Commission (SEC) faces a looming deadline of January 10th to make a ruling on the spot bitcoin ETF application filed by ARK Investment Management and 21 Shares.

While ARK's bitcoin ETF and other similar products are expected to gain approval by the deadline, Cathie Wood expressed caution in the decision to offload Grayscale holdings. In an interview with Bloomberg TV, Wood stated that the move was made "out of an abundance of caution" due to uncertainty surrounding the potential approval of the conversion in early January.

Wood explained that until more clarity is provided, ARKW has chosen to maintain its exposure to bitcoin through ProShares Bitcoin Strategy ETF. She cited tax and regulatory uncertainties facing spot bitcoin ETF applications as reasons for the cautious approach, emphasizing the need for applicants to meet the SEC's criteria for approval.

The recent resignation of Barry Silbert as chair of Grayscale was noted, although no reasons were disclosed in the regulatory filing. Despite this development, Wood highlighted positive news for ARK, pointing to bitcoin's rally this year and the narrowing of the discount between GBTC's price and its net asset value. The discount, which previously stood at over 40% in June, has reduced to approximately 6.9% as of Wednesday.

The cryptocurrency market has experienced significant volatility, with bitcoin surging over 160% since the beginning of the year, although it remains nearly 40% below its peak in 2021, according to CoinDesk data.

As the market eagerly awaits a potential spot bitcoin ETF approval, MicroStrategy made headlines by acquiring an additional 14,620 bitcoin on Wednesday for approximately $615.7 million. The move has pushed the company's total bitcoin holdings to around 189,150, as confirmed by the firm's CEO, Michael Saylor.

With the SEC's decision on the spot bitcoin ETF application drawing closer, industry participants are closely monitoring developments surrounding bitcoin investments and the potential for further regulatory clarity in the cryptocurrency market.