The current level of optimism among crypto investors regarding the possibility of the world’s largest Bitcoin investment product becoming an exchange-traded fund is the highest it has been in over a year. This is the highest it has been since the beginning of 2018.
The discount of the $18.8 billion Grayscale Bitcoin to its net asset value has decreased to approximately 25% as of Thursday.
What was the cause?
This encouraging turn of events takes place as the eagerly anticipated court decision on Grayscale Investment’s proposal to convert it into an ETF draws closer. Since May 2022, the value differential has dropped to its lowest point ever as of right now.
During an interview that took place on Thursday on Bloomberg TV, Michael Sonnenshein, the Chief Executive Officer of Grayscale, stated that the company’s legal counsel has indicated that a decision should be expected no later than the end of the fall season. In addition, he stated that the decision of the court could be released “any day.”
Because the trust has been conducting its business as a closed-end fund without ever redeeming any of its shares, it currently trades at a discount of more than forty percent in comparison to the value of its underlying Bitcoin holdings. On the other hand, the structure of ETFs enables the creation and redemption of shares in response to shifts in the demand for the fund’s holdings.
Last year, the Securities and Exchange Commission (SEC) shot down Grayscale’s proposal to turn the Bitcoin trust into an exchange-traded fund (ETF), citing concerns about the possibility of fraud and market manipulation.
Given that the SEC had in the past given its approval to Bitcoin futures-linked ETFs, Grayscale decided to take legal action and file a complaint with the DC Circuit Court of Appeals, arguing that the decision was arbitrary and discriminatory.
Elliott Stein, a senior litigation analyst at Bloomberg Intelligence, believes that the verdict in Grayscale’s lawsuit will most likely be announced no later than the end of September. This is based on the fact that the oral arguments took place in March.
The source claims that the District of Columbia Circuit Court publishes its opinions on a consistent basis on Tuesdays and Fridays, typically around 11 am local time. It is anticipated that a decision regarding Grayscale’s case will be made public on one of the aforementioned days.
The increasing optimism regarding the prospect of GBTC becoming an ETF is responsible for the discount’s narrowing. Either the ongoing lawsuit with the SEC or the potential approval of one or more of the other eight spot Bitcoin ETF applications submitted to the SEC are what are driving this hope.
From the inside of Bloomberg:
The lawsuit is still ongoing. James Seyffart, who works as an analyst for Bloomberg Intelligence, provided this bit of information.
The experts at Bloomberg Intelligence have determined that there is a 70% chance that Grayscale’s lawsuit will be successful in its fight against the SEC. The lines of questioning that the judges observed during the oral arguments are the basis for this improvement in the probability.
They also anticipate that there is a 50% chance that the SEC will grant approval for a spot Bitcoin ETF, particularly in light of recent applications from companies such as BlackRock Inc. and others.
During the course of the interview, Sonnenshein reaffirmed that Grayscale intends to reduce the fees for GBTC once it transforms into an ETF; however, he did not provide any specifics regarding the reduction in fees. At this time, the trust charges an annual fee that is 2%.
Sonnenshein shared his excitement over the continually expanding use of bitcoin. He stated that the team is fully prepared and committed to converting GBTC into a spot Bitcoin ETF, and that they are eagerly awaiting the decision from the DC Circuit, by adding that the team has been working on this for quite some time.