In the wake of asset manager BlackRock’s (BLK) application to launch a spot bitcoin ETF in the United States, the discount to the Grayscale Bitcoin Trust’s (GBTC) net asset value (NAV) continues to narrow.
Concurrently, Grayscale has filed a letter in its litigation against the United States Securities and Exchange Commission (SEC) regarding the rejection of a spot Bitcoin exchange-traded fund (ETF), citing a potential precedent in support of its case.
Grayscale lawyers fight back as SEC approves leveraged BTC ETF
Grayscale’s legal team informed the U.S. Court of Appeals for the District of Columbia Circuit of the listing of Volatility Shares Trust’s leveraged Bitcoin futures ETF in a letter dated July 10. The crypto investment vehicle began trading on June 27 without interference from the SEC, which has not authorized any spot crypto ETFs but BTC futures ETFs to date.
According to Grayscale, the Volatility Shares ETF exposes investors to an “even riskier investment product” than BTC futures ETFs, which suggests that the SEC may sanction its offering. After the SEC denied the asset manager’s application to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF in June 2022, the asset manager filed a lawsuit against the SEC.
The fact that the Commission has allowed a leveraged bitcoin futures ETP to begin trading demonstrates that the Commission continues to arbitrarily treat spot bitcoin ETPs differently than bitcoin futures. The 2x Bitcoin Strategy ETF is therefore exposed to even more risks of the bitcoin markets than Grayscale’s proposed spot bitcoin ETP.
Grayscale
Several firms have filed applications with the SEC for spot crypto ETFs, including BlackRock, the largest asset manager, and ARK Investment Management. In response to a June report in which SEC officials claimed crypto ETF filings were not “sufficiently clear and comprehensive,” a number of applications were resubmitted with Coinbase as a surveillance partner.
Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into an ETF was denied by the SEC last year, prompting the company to submit an appeal alleging a violation of the Administrative Procedures Act. In March, the DC Circuit Court heard arguments from both parties and a decision could be rendered by the end of the year.
Grayscale Bitcoin Trust discount hits rock bottom
In the wake of asset manager BlackRock’s (BLK) application to launch a spot bitcoin ETF in the United States, the discount to the Grayscale Bitcoin Trust’s (GBTC) net asset value (NAV) continues to narrow.
Prior to BlackRock’s filing with the U.S. Securities and Exchange Commission in mid-June, the discount to net asset value (NAV) had ballooned to nearly 50% late last year and spent the majority of 2023 in a range on either side of 40%, but began a precipitous narrowing trend. It reached a low of 26% last week, the lowest level since May 2022, according to data from Ycharts, and is presently around 27%.
BlackRock’s application for a spot bitcoin exchange-traded fund prompted a number of filings and re-filings for comparable funds from a variety of industry participants, including asset management giant Fidelity. After years of rejections, investors are optimistic that the SEC will eventually approve a spot bitcoin ETF due to the actions of such powerful players.
In turn, this has increased demand for the deeply discounted GBTC, which the entity filed to convert into a spot bitcoin ETF nearly two years ago. The filing for Grayscale was one of those rejected by the SEC, prompting the company to sue the agency; a decision is anticipated by the end of the third quarter.
Momentarily, investor optimism regarding the SEC’s approval of a bitcoin spot ETF is high, but continued investor vigilance may be merited.
