Grayscale’s bitcoin trust shares jump 9% after ETF hearing
By Frances Yue
Grayscale Bitcoin Trust, or GBTC, saw its share price rise nearly 9% on Tuesday after a panel of judges appeared skeptical of the US Securities and Exchange Commission’s arguments at an appeals court hearing, as Grayscale continues its efforts to convert GBTC into a exchange-traded fund.
The judges at the District of Columbia Circuit Court of Appeals in Washington, DC, asked SEC senior counsel Emily Parise for details on the connections between bitcoin spot and futures and markets, questioning the agency’s argument that bitcoin futures ETFs would be more resistant to manipulation than spot. bitcoin ETFs, according to a live recording of the hearing.
In June, Grayscale filed a lawsuit against the SEC over the agency’s denial of an application to convert GBTC (GBTC) into an ETF. The SEC has given the green light to several bitcoin futures-backed ETFs, but has yet to approve any ETFs backed by the cryptocurrency itself, citing concerns about market manipulation.
The lawsuit filed by Grayscale is under the spotlight as it could shed light on whether and when a spot bitcoin ETF might be available in the US. Meanwhile, a successful conversion of GBTC to an ETF will help reduce the discount GBTC has traded to its net asset value, or the value of the bitcoins it holds.
Launched in 2013, GBTC traded at a premium to net asset value for several years, as it was for a long time the only exchange-traded fund holding bitcoin as its primary holdings. The premium turned to a discount in February 2021, due in part to the launch of the first spot bitcoin ETF in Canada. However, investors can only sell, but not redeem, their shares in the fund, in part because GBTC was structured similarly to a related fund.
To close the discount, Grayscale had lobbied the SEC and eventually filed a lawsuit against the agency to push for a conversion from GBTC to an ETF. For an ETF, institutional traders can continue to create and redeem shares, thereby closing the gap between the fund’s price and the value of its underlying assets through arbitrage.
“We look forward to the court’s final decision, and strongly believe that US investors deserve to have equal access to the Bitcoin ETF product that best suits their needs,” a spokeswoman for Grayscale wrote to MarketWatch in an email.
Representatives at the SEC did not immediately respond to a request for comment.
– Frances Yue
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03-07-23 1356ET
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