GBTC discount narrows to 15% as SEC misses ETF appeal deadline
Grayscale Bitcoin Trust share has tightened its discount relative to the underlying cryptocurrency held in the fund to its smallest gap in 22 months. This has reignited hope among investors that Grayscale might successfully turn its closed-ended bitcoin trust to an open-ended, spot-based exchange-traded fund (ETF).
On Monday, Grayscale Bitcoin Trust’s (GBTC) shares were trading at a discount to the trust’s actual net asset value. This level was last observed in.
Digital Currency Group’s flagship GBTC shares traded at a discount of 15.87% to net asset value (NAV), the lowest margin December 2021. The discount had previously deepened to an all-time low of almost 50% amid the bear market peak in December 2022.
The $3.83-billion Grayscale Bitcoin Trust currently offers exposure to 0.00093 BTC per share, an amount that trades for around $28.45 at time of writing. Through shares of GBTC, however, that same amount of Bitcoin trades at $22.4.
This positive development follows the U.S. Securities and Exchange Commission’s (SEC) decision not to appeal the D.C. Circuit Court of Appeals’ verdict from August. The court had set aside the SEC’s earlier decision to reject Grayscale’s attempt to convert its trust into an ETF. While it’s still possible for the SEC to deny Grayscale’s request again, the likelihood appears low, especially since the SEC has been actively engaging with other spot-ETF applications.
“As far as I know, the SEC did not appeal, which means it now has to reconsider its ruling. It could deny again for different reasons – but the agency is reportedly engaging with other potential issuers, which is unusual. It is starting to feel like it is getting ready to let them list,” said Noelle Acheson, the mind behind the Crypto Is Macro Now newsletter.
In June 2022, the company running the world’s biggest bitcoin fund sued the SEC after the agency rejected a bid to turn its investment vehicle into a fund that trades on major Wall Street exchanges. The court found that the SEC’s denial lacked sufficient explanation for treating bitcoin futures ETFs differently from spot bitcoin ETFs.
GBTC is a closed-end fund with a six-month lock-up of initial investments, which means it cannot easily add or remove shares to deal with inflows and outflows. As a result, the fund subscribers are unable for some time to redeem their shares in reaction to the spot price of bitcoin. Thus, its share price tends to trade at either a premium or a discount, rather than being tied to the underlying value of its assets.