The Increasing Expectations of ETF Approval Lead to a Decrease in Grayscale Bitcoin Trust Discount!

• Optimism regarding the potential approval of a spot Bitcoin ETF has helped reduce the discount on Grayscale Bitcoin Trust to below 10.35% of its net asset value.
• In October 2023, the Appeals Court reached a decision forcing the SEC to review its application as the firm had rejected the conversion of its fund to an ETF after filing a lawsuit against the SEC.
• In recent weeks, BlackRock has continued to pave the way for its Bitcoin ETF and proceeded with a symbol listed by DTCC in late October.

The growing expectations of Bitcoin ETF approval are causing a decrease in the discount rate on Grayscale’s Bitcoin Trust product: Will GBTC turn into an ETF?

ETF Expectations Lower GBTC Discount

Optimism regarding the potential approval of a spot Bitcoin ETF has helped reduce the discount on Grayscale Bitcoin Trust to below 10.35% of its net asset value, the lowest level since July 2021. Grayscale Bitcoin Trust (GBTC) allows investors to trade shares in trust funds holding large amounts of Bitcoin, with each share tracking the price of Bitcoin—roughly.

Since February 2021, GBTC has traded at a discount compared to the actual price of Bitcoin, reaching as low as 48% in December 2022. Grayscale has long-term goals of converting the Trust into a spot exchange-traded fund (ETF), allowing it to “trade like a stock on a national securities exchange” such as NYSE Arca or Nasdaq, according to Grayscale Chief Legal Officer Craig Salm.

The U.S. Securities and Exchange Commission (SEC) has so far rejected every spot Bitcoin ETF application, including Grayscale’s. However, in October 2023, the Appeals Court reached a decision forcing the SEC to review its application as the firm had rejected the conversion of its fund to an ETF after filing a lawsuit against the SEC.

SEC could still reject, but not so easily

The SEC could still reject Grayscale’s application, but it would need to reach new justifications to do so, as its previous rationale was found insufficient due to the inadequacy of the futures Bitcoin market being close enough to the spot market. The court decision accompanied a wave of optimism about the possible approval of a spot Bitcoin ETF following the entry of BlackRock, the world’s largest asset manager, into the sector in June 2023.

In recent weeks, BlackRock has continued to pave the way for its Bitcoin ETF and proceeded with a symbol listed by DTCC in late October. The likelihood of approval for a spot Bitcoin ETF has revitalized the crypto market; Bitcoin, rising by 5.4% in the last week, has surpassed $37,000, reaching the highest level in 18 months. At the time of publication, Bitcoin is trading steadily around $37,000.