Grayscale Investments CEO, Michael Sonnenshein, has expressed uncertainty about whether the company needs to refile its application with the United States Securities and Exchange Commission (SEC) to convert its GBTC product into a spot bitcoin ETF, even after a recent favorable court decision.
The US appeals court recently overturned the SEC’s rejection of Grayscale’s proposed spot bitcoin ETF, deeming the agency’s denial as “arbitrary and capricious.” Sonnenshein, in an interview with Bloomberg Television, stated that the company would need to wait for the final operational procedures outlined in the court’s mandate before deciding on a potential reapplication. The SEC has a 45-day window to request a rehearing, following which the court will issue a final mandate and further directives. Sonnenshein emphasized that the outcome remains uncertain until the end of this period.
The court’s ruling has opened up multiple possibilities for the SEC, including approving the conversion of GBTC into an ETF, denying it for alternative reasons, or even mandating the closure of existing futures-based bitcoin ETFs. Nathan Geraci, President of The ETF Store, noted these potential outcomes. The Grayscale Bitcoin Trust, currently available for trading in brokerage accounts, saw a shift in market dynamics following the news. The GBTC’s discount to its net asset value decreased from -25% to -17%, while the value of bitcoin surged by 5.4% to $27,450 immediately after the court’s decision. Subsequently, the GBTC experienced a 4% decline as the market pondered the feasibility of conversion.
Market reacts to Grayscale win
While market sentiment seems more confident in the possibility of conversion, there’s still an air of caution. Analysts believe that the market is not entirely convinced about the GBTC’s transition to an ETF. Grayscale charging a 2% fee, significantly higher than typical ETF fees, raises questions about investor enthusiasm for the transition. Sonnenshein, however, reaffirmed Grayscale’s commitment to reducing fees when the conversion to an ETF occurs.
Beyond its direct impact on Grayscale, the court’s decision could have far-reaching implications for pending spot bitcoin ETF applications. Various companies, including BlackRock, Bitwise, VanEck, WisdomTree, Invesco, Fidelity, and Valkyrie, are awaiting the SEC’s decision on their ETF proposals, with deadlines ranging from September 1 to September 4. The recent court ruling, which criticized the SEC’s reasoning, might pave the way for a more favorable environment for future applications.
Sonnenshein believes that with the elimination of the grounds the SEC has used for denials in the past, the road is now clearer for these types of products to enter the market. Bloomberg analysts also shared their view, estimating a 75% probability of a spot bitcoin ETF launch in 2023, potentially becoming a “done deal” by the end of 2024. As the legal landscape shifts and the path toward bitcoin ETFs becomes more promising, the cryptocurrency market and investors are keenly watching for developments that could reshape the investment landscape.
