Grayscale 'GBTC Discount' Narrows to Near 2-Year Low as SEC Misses ETF Appeal Window

The narrowing of the discount likely represents increased likelihood that Grayscale will be able to convert its close-ended bitcoin trust into a spot-based exchange-traded fund.

AccessTimeIconOct 16, 2023 at 6:42 a.m. UTC
Updated Oct 16, 2023 at 3:46 p.m. UTC

The widely tracked crypto market indicator "GBTC discount" narrowed to its lowest in 22 months on Friday, signaling increased optimism that Grayscale will be able to convert its close-ended bitcoin trust into an open-ended spot-based exchange-traded fund (ETF).

On Friday, shares in Grayscale Bitcoin Trust (GBTC) traded at a discount of 15.87% to the trust's net asset value, reaching the level last seen in December 2021, according to YCharts. The discount has been steadily narrowing since reaching a record low of nearly 50% during the height of the bear market in December last year.

The latest improvement came as the U.S. Securities and Exchange Commission (SEC) decided not to appeal against the D.C. Circuit Court of Appeals' August verdict to set aside the regulator's decision to reject Grayscale's attempts to convert its trust into an ETF. The SEC had until Friday midnight to challenge the decision.

Grasycale and CoinDesk are part of the Digital Currency Group.

The SEC could now come up with new reasons to reject Grayscale's bid to cover its trust into an ETF or request an en banc appeal. That said, the probability appears low, considering the regulator 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," Noelle Acheson, author of the popular Crypto Is Macro Now newsletter, said in the weekend edition.

Nate Geraci, president of the ETF Store, voiced a similar opinion on X last week, saying the lack of appeal would mean a potential spot ETF launch in January 2024, with Grayscale probably taking the lead over other issuers.

On June 15, the world’s largest fund manager and traditional finance heavyweight, BlackRock filed for a spot bitcoin ETF with the SEC, with Fidelity, Invesco, Valkyrie Investments, WisdomTree, and VanEck following BlackRock's lead in the subsequent days.

A potential approval of a spot-based ETF is widely expected to unlock floodgates to billions of dollars in mainstream money, although Coinbase Institutional expects the flows to materialize over time.

Edited by Parikshit Mishra.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.