Grayscale Bitcoin Trust Discount Shrinks as ETF Optimism Mounts

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Optimism surrounding the potential approval of a spot Bitcoin ETF has helped to drive the Grayscale Bitcoin Trust’s discount to 10.35% below its net asset value, its lowest level since July 2021, per data from Ycharts.

The Grayscale Bitcoin Trust (GBTC) enables investors to trade shares in trusts that hold large pools of Bitcoin, with each share tracking the price of Bitcoin—albeit approximately. Since February 2021, GBTC has traded at a discount relative to the actual price of Bitcoin, dropping as low as 48% in December 2022.

Grayscale has long harbored ambitions to convert the Trust into a spot exchange-traded fund (ETF), which would enable it to be traded “like a stock on a national securities exchange, such as NYSE Arca or Nasdaq,” according to Grayscale Chief Legal Officer Craig Salm.

The U.S. Securities and Exchange Commission (SEC) has, to date, rejected each and every application for a spot Bitcoin ETF, including Grayscale’s—but in October 2023, the Court of Appeals ordered the regulator to review Grayscale’s application after the firm sued the SEC for refusing to allow the fund’s conversion into an ETF.

Chart showing GBTC discount — GBTC discount. Source: Ycharts

While the SEC could still reject Grayscale’s application, it would need to find new grounds for doing so, its previous justification—that the futures Bitcoin market is not closely connected enough to the spot market—having been deemed insufficient.

The court order has accompanied a wave of optimism over the possible approval of a spot Bitcoin ETF, following the entry of BlackRock, the world’s largest asset manager, into the fray in June 2023. In recent weeks, BlackRock has continued to lay the groundwork for its own Bitcoin ETF, with a ticker listed by the Depository Trust & Clearing Corporation (DTCC) in late October.

The prospect of a spot Bitcoin ETF approval has buoyed the crypto market, with Bitcoin surging to an 18-month high of over $37,000 in the last week. At time of publication, Bitcoin has stabilized at around $37,000, trading flat on the day and up 5.4% in the last seven days.