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Grayscale Bitcoin Trust (GBTC) Soars Gains 137% Amid Discount Contraction 

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In a remarkable turn of events, Grayscale’s Bitcoin Trust (GBTC) has become the talk of the cryptocurrency town as traders who seized the opportunity during its darkest days are now reaping substantial profits. The discount between GBTC’s share price and underlying Bitcoin holdings has steadily shrunk, catapulting the trust’s shares to new heights.

On Thursday’s market open, GBTC shares surged to $19.71, a remarkable 137% jump from last year’s December low of $8.29. During this time, GBTC traded at an unprecedented 50% discount compared to its Bitcoin holdings, an unparalleled price gap noted by Ycharts. GBTC outpaced Bitcoin’s gains, rising 48% from $17,800 to $26,300.

Grayscale’s Bitcoin Trust, managing a substantial $17 billion asset, offers investors a unique pathway into Bitcoin via security-backed shares. Each GBTC share symbolizes ownership of a fractional Bitcoin worth 0.00090084 of a full coin, amounting to $24.49 at market opening. Yet, owing to the trust’s structural limitations, shares have consistently traded at a discount since February 2021. GBTC’s 692 million outstanding shares collectively amounted to $13.6 billion, or $19.71 per share, falling short of the trust’s Net asset value of $23.73.

GBTC Discount Battle And Redemption Hopes

GBTC’s status as a closed-end fund restricts the easy conversion of shares into Bitcoin, leading to price discrepancies as supply and demand dynamics fluctuate. The discount widened significantly after the collapse of the cryptocurrency exchange FTX last year and a subsequent decline in digital asset prices. At its lowest point, a GBTC share represented just $16.22 worth of Bitcoin while trading at $8.29, per Grayscale’s official website.

The long-awaited redemption mechanism that could erase this discount may finally be within reach if the Securities and Exchange Commission (SEC) grants Grayscale’s request to convert GBTC into a spot Bitcoin ETF, an ambition the firm has pursued for years. Last June, Grayscale took the SEC to court after denying its initial application. Still, the recent courtroom victory that compelled the SEC to reconsider has resulted in a discount reduction of under 20%.

The discount began to shrink earlier this year during the hearings of the now-decided lawsuit, contracting from 46% to 34% on March 8 as the judges showed increasing scrutiny of the SEC. Since then, the discount has continued to narrow. With experts from Bloomberg’s ETF team, Eric Balchunas and James Seyffart, giving it a 75% chance of approval this year, the prospect of a spot Bitcoin ETF has garnered substantial optimism.

Notably, a similar trend in discount reduction was observed when BlackRock, one of the world’s largest asset managers, expressed its intentions to establish a spot Bitcoin ETF. Although the discount had widened to around 41% on June 15, it quickly reverted to 34% the following week. The cryptocurrency community now watches eagerly as GBTC inches closer to potentially closing the discount gap and revolutionizing the landscape of Bitcoin investment.

Related Reading:| Bitcoin Rally Continues: Analysts Present Bullish Predictions Amid Greyscale’s Victory

Breaking: Federal Court Grants Grayscale’s Petition, Orders SEC To Review GBTC Rejection

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Today, the Federal Court has ruled in favor of Grayscale Investments, granting their petition for review and vacating the U.S. Securities and Exchange Commission’s (SEC) order rejecting the conversion of the Grayscale Bitcoin Trust (GBTC) into an Exchange-Traded Fund (ETF). This decision could pave the way for GBTC’s transformation into an ETF, triggering a 4.1% surge in Bitcoin’s value within an hour.

The Federal Court’s ruling has spotlighted the SEC’s recent order, which denied Grayscale Investments’ proposal to convert GBTC into an ETF. The court found fault with the SEC’s decision, deeming it “arbitrary and capricious” due to the agency’s failure to provide a coherent rationale for the differing treatment of similar financial products.

According to the court’s opinion, Grayscale Investments presented compelling evidence demonstrating an impressive 99.9% correlation between the Bitcoin spot market and the Chicago Mercantile Exchange (CME) futures price. The SEC’s lack of substantial reasoning for greenlighting two bitcoin futures Exchange-Traded Products (ETPs) while rejecting Grayscale’s ETP proposal was deemed inconsistent and legally questionable.

Judge RAO expressed that the absence of a cogent explanation for the differing regulatory treatment of similar products violates established legal norms. As a result, the court granted Grayscale’s petition for review and overturned the Commission’s initial order.

Potential Path Forward: Implications For GBTC’s Future

ETF Analyst James Seyffart weighed in on the court’s decision through a tweet, providing insights into its implications. He clarified that while the Federal Court’s ruling is a significant step forward, it does not automatically ensure the conversion of GBTC into an ETF. The court’s order mandates the SEC to issue a new order within either 45 or 60 days.

Additionally, Seyffart highlighted that the SEC retains the option to file for an en banc hearing within 45 days as part of the appeals process.

BTC Surges Response To Grayscale’s Favorable Ruling

The financial markets reacted swiftly to the Federal Court’s decision. Bitcoin experienced a rapid surge of 4.1% in value within a span of just one hour following the announcement. This boost in the cryptocurrency’s value indicates the market’s approval of the potential transformation of GBTC into an ETF.

Related Reading | Bitcoin-Backed ETF in Europe Sparks ESG Debate

GBTC Litigation Could Signal Bitcoin’s Maturity, Says Bloomberg Strategist

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Bloomberg’s senior commodity strategist, Mike McGlone, asserts that Bitcoin and the broader cryptocurrency market may be on the verge of a significant shift, as rising Bitcoin futures open interest and narrowing fund price disparities may signal an unstoppable maturation process.

In a recent tweet, McGlone highlighted the potential impact of the ongoing litigation surrounding Grayscale Bitcoin Trust (GBTC), which could mark a milestone for BTC and crypto maturity.

The GBTC, which provides investors with exposure to Bitcoin through a trust, has historically traded at a significant premium to the underlying asset. However, this premium has dwindled over the years, and the trust is now trading at a discount of around 36% to the price of BTC.

However, this downward trajectory may be coming to an end as the trust gains the potential to convert to an ETF. This move could be a game-changer for the cryptocurrency market, as it would allow institutional investors to gain exposure to BTC more easily and efficiently.

Following an oral argument on March 7th, in which Grayscale argued against the SEC’s rejection of its ETF application, Bloomberg now believes that Grayscale is favored to win a ruling vacating the rejection order.

This news could be a significant boost for BTC and the broader cryptocurrency market, which has seen increased institutional interest in recent years. Rising futures open interest and narrowing fund price disparities suggest that the crypto market is becoming more mature and sophisticated, with investors looking beyond short-term volatility and focusing on long-term potential.

Nevertheless, the ongoing litigation surrounding the GBTC could mark a significant milestone for BTC and crypto maturity. As institutional investors continue to enter the market and regulatory clarity improves, the future of Bitcoin and cryptocurrencies looks bright.

Bitcoin Price Review

Bitcoin’s price has dropped below $20,000 for the first time since mid-January due to bearish news. Despite the setback, BTC has regained some ground, hovering around $20,040. As of now, it is down 8.01% in the past 24 hours and trading at $19,958.16. 

Source: CoinMarketcap

Bitcoin had reached a record high of over $69,000 in November 2021 but experienced a significant drop in 2022 to start 2023 at around $16,600. However, a powerful rally in mid-February pushed BTC up more than 50% for the year, peaking at $25,000.

Related Reading | Bitcoin Slides Below $20K Amidst Growing Crowd’s Interest

Bitcoin ETF Rejection: Grayscale Submits Response Brief in Appeal Against SEC 

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Grayscale has submitted a response brief in its appeal against the US Securities and Exchange Commission’s (SEC) rejection of its proposal to transform its $12 billion Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF that is based on spot prices. 

The brief, which was filed in the District of Columbia Circuit Court, refutes the points made in the SEC’s December response brief and reiterates Grayscale’s original arguments.

GBTC Conversion To A Spot Bitcoin ETF

Grayscale’s Chief Legal Officer, Craig Salm, announced via a Twitter thread that they had filed a reply brief in their appeal against the US SEC. Salm stated that this is a significant milestone as Grayscale filed the Petition for Review in June, their Opening Brief in October, and the SEC’s Reply Brief in December. 

The recent brief is shorter than the previous one and “addresses counterpoints made by the SEC in their brief while also re-emphasizing key substantive arguments from” the Opening Brief.

Salm accused the SEC of treating spot bitcoin ETFs differently from bitcoin futures ETFs, despite both deriving their pricing from the same underlying spot bitcoin markets. 

Salm further stated that the “significant market test” used by the SEC to evaluate the proposal is deeply flawed, exceeds their statutory authority, and is arbitrary and unreasoned. 

Salm also stated that Grayscale believes:

Our proposal to convert GBTC to a spot bitcoin ETF satisfies the requirements of the Exchange Act because it is designed to prevent fraud and manipulation while protecting investors and the public interest.

He also announced that they would continue to keep their community apprised of developments in the litigation. The next milestone will be their final briefs, due February 2nd. He also noted that the timing for oral arguments is uncertain, but it may be as soon as Q2, the final decision in DC Cir. App. Court could come by Fall.

Salm Call Support For Grayscale Bitcoin Trust’s Case

Grayscale’s Chief Legal Officer Craig Salm, in a tweet on January 11th, called on the public to support their case. He emphasized that this case is of paramount importance for the 850k+ shareholders who hold GBTC, as the conversion is expected to close the current discount to NAV and unlock over $4 billion of value. 

Salm also stated that Grayscale has some of the best legal minds representing GBTC shareholders in the District of Columbia Circuit Court of Appeals, including Don Verrilli, a former Solicitor General under the Obama administration, and his team at MTO and Davis Polk. 

While expressing confidence that the Court will rule in their favor, Salm also acknowledged that they have committed to exploring alternative paths to returning capital to GBTC shareholders if their legal challenge is unsuccessful. 

These options could include a tender offer for a portion of GBTC shares, subject to relief and approvals from the SEC, as outlined by Sonnen shein. 

However, Salm emphasized that pursuing an alternative path would deviate from GBTC’s long-held ETF aspirations and would not be an ideal outcome. It would also effectively mean that regulators have shut the door on efficient access to Bitcoin through US-regulated investment vehicles.

Related Reading | RippleX Announces Wave 4 Awardees – Totaling $2.6M in Funding To 26 Projects

Here’s Why Grayscale is Being Sued For Allegedly Mismanaging Its GBTC

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Grayscale Investments is the target of a lawsuit brought by hedge fund Fir Tree. To look into “possible mismanagement and conflicts of interest” at its $10.7 billion Bitcoin fund, it is requesting information. The information sought might be used to compel the firm to alter how its flagship Bitcoin Trust—GBTC—is managed.

According to a recent Bloomberg report,

“Fir Tree, which manages $3 billion, wants to use the information to push Grayscale to erase the discount by lowering fees and resuming redemptions, said people familiar with the hedge fund’s plans. The trust has roughly 850,000 retail investors who have been “harmed by Grayscale’s shareholder-unfriendly actions,” the firm said in the complaint.”

Grayscale’s Redemption Bar “Self-Imposed”

Grayscale’s redemption bar, which dates to 2014, was allegedly “self-imposed,” according to Fir Tree. It further stated that the trust could permit investors to withdraw their money without obstruction under the law. However, the firm has stated in regulatory filings that it is unable to provide an “ongoing redemption program.”

The hedge fund further claimed that Grayscale resisted share redemption since doing so would reduce profits. The corporation allegedly sold “an incredible number” of additional shares between 2018 and 2021, according to the lawsuit. It imposed a 2% fee, higher than its rivals, on the market value of its Bitcoin holdings rather than the lower share market price. The firm received $615.4 million in fees last year, according to Fir Tree.

Grayscale’s attempts to turn the trust into an ETF must also be stopped, according to Fir Tree. The firm has often asserted that this is the only method company can legitimately redeem shares. According to a statement sent to Bloomberg by a Grayscale spokesperson through email,

“In 2013, we launched Grayscale Bitcoin Trust (GBTC) to provide investors with access to Bitcoin, and always with the intention of converting it to an ETF when permitted by US regulators. We remain 100% committed to converting GBTC to an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders.”

Since late February, GBTC shares have been trading at a discount. The discount gap was as wide as 43.04% at the time of publication.

Source: Y Charts

Grayscale Total Assets Under Management Reaches $50 Billion

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Investment giant, Grayscale has reached a new milestone of $50.6 billion in cryptocurrency assets under management [AUM] on the 14th of April. The AUM figure has been quite impressive, increasing by an incredible 2,400% from a mere $2 billion at the beginning of 2020.

The Grayscale Bitcoin Trust [GBTC] continued to dominate the charts and accounted for a whopping $41.44 billion, while the Ethereum Trust [ETHE] trailed behind with $7.42 billion followed by the remaining trusts, including Litecoin trust [LTCN], Ethereum Classic Trust [ETCG], and Bitcoin Cash [BCHG], with $405.5 million, $267.4 million and $234.3 million respectively.

Grayscale has witnessed a rise in its total AUM figure by over $3 billion right after its plan to further diversify its crypto-trust offerings that involved the addition of five new tokens for their eligible accredited investors.

Grayscale Bitcoin Fund [GBTC] Vs GLD fund 

With the latest surge, the asset manager is inching closer to the largest Commodities ETF, the SPDR Gold Trust GLD which has $57.70 billion in assets. And there are certain industry experts that speculated this could happen soon. Senior Commodity Strategist, Mike McGlone, for one, believes that the firm’s Bitcoin Trust would eventually overtake the most popular gold-pegged ETF SPDR Gold Trust [GLD] in the coming days. His tweet read,

“Bitcoin Trust on Track to Surpass World’s Largest Commodity ETF – In a world going digital, we believe gold symbolizes the diminishing potential for sustained commodity-price advances, notably vs. Bitcoin. The crypto is a prime example of how advancing innovation suppresses.”

Grayscale had announced its plans of converting its main product GBTC into an ETF. Hence, if approved, this would make the platform accessible to an even wider section of investors at a much lower cost. While the SEC is yet to give a green light to such an investment offering, but if approved Grayscale would easily become the second-largest commodity ETF just behind the SPDR Gold Shares.

The world’s largest cryptocurrency has surfaced as the growing choice of market participants around the world. This, in turn, prompted North American regulators to approve a few Bitcoin ETFs. As opposed to the Bitcoin’s bull season, Gold, on the other hand, has continued its downtrend starting after the first quarter of 2020.

Grayscale Report Shows Evidence That Investors Were Regaining Trust in Crypto Market; GBTC Holdings Surge

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The cryptocurrency market’s resurgence over the past few weeks has kick-started significant asset movements on major exchanges. As the world comes to terms with dealing with life in quarantine, the market fluctuations represent the growing investor’s interest across the board.

Grayscale Investments, one of the largest and most popular cryptocurrency investment companies recently announced that over the past few weeks, the amount of holdings had increased steadily.  A calculation by the company showed that the total Assets Under Management had increased to a whopping $6.1 billion. 

According to Grayscale, a majority of the investments had flow into the Grayscale Bitcoin Trust. Bitcoin’s bullish performance over the past few had instilled confidence among its holders, who have brought into the market once again. The Bitcoin aspect of the trust amounted to $5037 million with a 3.2 percent increase on the daily. . The market price per share was calculated to be $14.75 percent while the holdings per share came to $11.6.

After Bitcoin, Bitcoin Cash held the major Grayscale repository with a $30.7 million hold in the trust. The BCH holdings per share were $2.94 percent with a 6.91 percent change every day. Bitcoin Cash’s volatility was one of the largest when compared to Bitcoin and Ethereum. Ethereum made up the the podium in Grayscale’s investment fund. The world’s largest altcoin had a total holding of $876. 6 million with a daily change of $1.61 percent. Ethereum’s market share held a healthy $83.9, which was the largest among its compatriots.

Grayscale’s Litecoin holdings were lesser than that of Ethereum Classic’s, Ethereum’s hard fork that has surprisingly made a positive impact in some areas. ETCG had a holdings per-share value of $6.64 while the daily change was 6.58 percent. At the same time, Litecoin’s Grayscale AUM amounted to $19.8 million at a daily rate change of 13.91 percent.

The Trusts by Grayscale are open-ended and sponsored by the company. Their main intention is to enable exposure to the price of movement of each trust’s underlying assets. This process avoids the challenges of storing, buying and safekeeping any of the aforementioned digital assets.

Bitcoin Expected To Receive More Institutional Investors as Grayscale Investments Gets Recognized By The SEC

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Cryptocurrency companies have been making a name for themselves in the past couple of months with several achieving mainstream status. One of the biggest winners in that category has been Grayscale Bitcoin Trust, the company that launched the famous “DropGold” campaign.

Just recently, Grayscale Investments announced that it has become an SEC reporting company. This comes two months after the company had filed a Registration Statement on Form 10 with the SEC on behalf of Grayscale Bitcoin Trust [GBTC].

Since its inception, Grayscale Bitcoin Trust has grown to become the world’s largest Bitcoin investment product. The company recently released a circular that addressed the organization’s plans for the future now that it was an SEC reporting company.

GBTC claimed that its main directive is to provide Bitcoin services to users without them having to go through the hassle of managing it. This includes challenges such as storing, buying and safekeeping Bitcoin on their own.

The way GBTC works is similar to that of financial and tax advisors, one of the reasons why it was accepted by the SEC. By becoming the first digital investment vehicle to be registered with the SEC, GBTC has broadened Bitcoin’s availability to all US investors.

GBTC’s SEC addition will also allow more institutional investors to get into the Bitcoin field. The entry of institutions was earlier reduced because of the lack of credibility in the eyes of regulatory authorities. According to the Grayscale Investment report:

“While the Trust has historically published quarterly and annual reports as well as audited financial statements pursuant to the OTC Markets Alternative Reporting Standard (ARS), the Trust will now file its quarterly and annual reports as well as audited financial statements as 10-Qs and 10-Ks with the SEC, along with current reports on Form 8-K, in addition to complying with all other obligations under the Exchange Act.”

With the addition of the SEC’s structure, the trust is designed to have its share value reflect the performance of Bitcoin. The company will also have fewer expenses and other liabilities as it is “solely and passively invested in Bitcoin”. According to the report, GBTC will continue to not run the redemption program or trade on a national securities exchange.

The news was also shared by Coinbase Custody as Grayscale Investments was its client. The Brian Armstrong led company was confident that being part of the SEC was an incredible milestone for the entire digital currency market.