Grayscale, a leading digital asset manager, has announced its intention to convert its Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF. This conversion would allow GBTC to trade at a price closer to the actual value of Bitcoin rather than the current 8.09% discount of about $1.89 billion. The move aims to benefit investors who want exposure to Bitcoin without direct purchases.
Grayscale’s chief legal officer, Craig Salm, and chief financial officer, Edward McGee, shared the plan details. They said GBTC would move from its current OTCQX platform to the prestigious NYSE Arca exchange, subject to United States Securities Exchange Commission approval. This exchange transfer enables GBTC to track the real Bitcoin price more accurately and provides a simpler way for investors to create or redeem shares.
Regulation M could Be A hurdle For Grayscale
However, the SEC approval process could face challenges from Regulation M (Reg M) relief requirements. Reg M prevents market manipulation and fraud in securities offerings. ETF analyst Eric Balchunas from Bloomberg noted Reg M could obstruct or delay Grayscale, based on past SEC conversations. He also highlighted the interesting Reg M mentioned timing right after Grayscale’s SEC meeting, suggesting significance.
Reg M relief is crucial for Grayscale because it would allow share creation or redemption without affecting Bitcoin’s market price. Without this relief, Grayscale must buy or sell Bitcoin openly, causing price fluctuations and arbitrage. Reg M relief also prevents activities from artificially influencing GBTC supply or demand.
Bitcoin ETF Could Attract More Investors
If Grayscale succeeds in becoming a Bitcoin ETF, it could positively impact the Bitcoin market and the broader crypto industry. With Bitcoin currently trading at $39,481 and increased volume indicating high trader interest, a Bitcoin ETF would provide a more accurate Bitcoin value representation through GBTC and a safer access method. This could attract more institutional investors and increase Bitcoin adoption and acceptance.
Bloomberg ETF analyst James Seyffart said the SEC delayed its decision on applications 34 days earlier than the Jan. 1, 2024 deadline. Seyfarth and colleague Eric Balchunas placed 90% odds on spot Bitcoin ETF approvals by Jan. 10, 2024. The twin delays likely aim to align applicants for potential approval by the deadline, Seyfarth said.