Grayscale Bitcoin Trust trades 35% lower than the BTC price after ETF denial

Shares in Grayscale Bitcoin Trust were traded at a unique discount of 35% following the Securities and Exchange Commission’s rejection of the application for transition to a spot market Bitcoin ETF.

The circumstance is ironic, given that the existing rebate was one of Grayscale’s primary arguments for why the transition had to take place. Last month, the company held a private meeting with the SEC, according to a CNBC report, in which it claimed that the conversion of the Bitcoin Trust (which is traded as GBTC) into an ETF could potentially unlock $ 8 billion for investors by eliminating the discrepancy.

At the time, GBTC shares traded at about a 25% discount to the company’s underlying Bitcoin, which means that it was 25% cheaper to buy GBTC than the Bitcoin it represents. Yesterday, that discount grew to as wide as 35%, based on a calculation of Grayscale’s net asset value last night. In particular, while Bitcoin per share stood at $ 18.62, the market price for each share was only $ 13.32

Meanwhile, the price of Bitcoin has continued to fall, reaching down to around $ 19,000, following the SEC’s rejection of Grayscale’s ETF application. This has helped bring Grayscale’s total share value a little closer to parity with the Bitcoin portfolio, as the value of the latter falls.

An ETF is a type of investment car that provides indirect exposure to an asset, such as gold, without having to own and store the asset itself. A Bitcoin ETF will allow investors who are uncomfortable managing cryptocurrency directly, to gain exposure to the asset, along with companies that may be barred from buying Bitcoin directly through internal charters.

Grayscale is the largest crypto asset management company in the world. The Bitcoin Trust has nearly $ 12.9 billion in assets under management as of Wednesday.

However, many investors consider GBTC to be a less than ideal investment vehicle for Bitcoin exposure. Unlike an ETF product, it is not easy to either create or redeem shares in GBTC in response to Bitcoin’s market movements. This is why supply and demand for GBTC shares can vary widely from Bitcoin at any given time, creating price differences.

GBTC is now trading at just $ 12.28 – or 0.00064 BTC – per share.

Grayscale CEO Michael Sonnhenshein has taken both public and private action to persuade the SEC to allow Grayscale’s conversion since October. The fund’s efforts began immediately after the very first Bitcoin futures ETF was approved last year, which gave confidence that a spot ETF would soon follow. A spot ETF will track the price of Bitcoin in real time, while futures ETFs are derivative products, regulated by the CFTC, that bet on what the price will be at a later date.

SEC Chairman Gary Gensler is still opposed to a Bitcoin ETF for the sports market, and often cites market manipulation and concerns about consumer protection. Grayscale sees it differently and believes Gensler and the SEC “discriminate” Bitcoin unfairly. Following the SEC’s latest rejection, the company immediately announced a lawsuit against the commission for “failure to apply consistent treatment to similar investment vehicles.”

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