Grayscale Discount Continues to Narrow as Spot Bitcoin, Ether ETF Euphoria Works Through Markets

Bitcoin (BTC) began the trading week in Asia above $37,000 and ether (ETH) above $2,000, with prices little changed from an exchange-traded fund rally that closed last week, helping narrow the discount on the Grayscale Bitcoin Trust (GBTC) to levels not seen since July 2021.

Data from YCharts shows the trust's discount to its net asset value is 10.35%. The discount has been shrinking from a record of almost 50% during the depths of the FTX-induced crypto winter in December last year.

Last week, CoinDesk reported that the U.S. Securities and Exchange Commission (SEC) initiated discussions with Grayscale Investments about converting the trust to a spot bitcoin ETF, which, if successful, would provide significant market momentum and liquidity.

Grayscale Investments and CoinDesk are both owned by Digital Currency Group.

Bitcoin fund holdings have reached an all-time high, driven by investor enthusiasm over the anticipated approval of a spot bitcoin ETF in the U.S., with total inflows exceeding $1 billion this year, CoinDesk recently reported.

Market sentiment has also been lifted by last week's announcement that fund-management giant BlackRock is planning to issue an ether-based ETF. News of the announcement pushed ETH to a seven-month high, outperforming bitcoin.

In a recent interview with CoinDesk TV, Diffuse Funds CEO Kenny Estes said BlackRock's decision to apply for an ether ETF shows the financial giant is highly confident the bitcoin ETF will be approved.

"I think it will get approved, and the biggest reason for that is because BlackRock put in the application," he said. "The fact that they're putting in an Ethereum application, to me, sounds like it's a predetermined outcome that it will be approved."

Meanwhile, trading activity on decentralized exchanges (DEXs) is also at a six-month high as traders cycle out of altcoins and into ether in anticipation of any ETF approval, according to research from WOO Network shared with CoinDesk.

“[Recent] extreme market volatility showed Arbitrum is still the lead performer in the L2 race, capturing six times the 24-hour trading volume of Optimism, and 25 times that of Base," Ben Yorke, WOO Ecosystem VP said in a note shared with CoinDesk, referring to layer-2 blockchains. "That said, what’s clear is that Ethereum is still ultimately the end boss, overseeing more than twice the volume of all Layer 2 scaling solutions combined – driven in part by the volatility surrounding Blackrock’s apparent filing for an ETH ETF.”

Crypto traders will likely have their eye on Core Consumer Price Index data and U.S. retail sales data, scheduled to be released later this week, along with speeches by New York Fed President John Williams, which should give clues into where interest rates are going.