Shrinking Gap Between Bitcoin and GBTC Shares Following SEC’s ETF Decision Raises Investment Stakes

The difference between the value of Bitcoin and GBTC shares has lessened following the SEC’s denial of Grayscale’s request to transform its trust into an ETF. Over the past year, many investors reportedly gained from the expectation that the SEC would approve a product directly linked to Bitcoin’s value.

After a U.S. Court of Appeals directed the SEC to reevaluate its initial refusal of Grayscale Bitcoin Trust’s (GBTC) ETF conversion application, the discount between GBTC shares and the actual value of Bitcoin decreased to roughly 17%, as stated by the Wall Street Journal.

Managing $16.1 billion in assets, GBTC offers investors a chance to invest in Bitcoin through financial security. Each share equates to ownership of a small portion of a Bitcoin, specifically 0.00090040 of a full coin, initially priced at $24.49.

Analysts note that Bitcoin’s modest increase this year, along with the shrinking discount, has more than doubled GBTC’s share value in 2023. Nonetheless, the path from GBTC to ETF is fraught with challenges. The SEC now faces a limited timeframe to react to the court’s ruling, and there’s a chance the agency might appeal. Additional conditions imposed by the court add another layer of uncertainty to the situation.

The SEC has also postponed its judgment on several Bitcoin spot ETF applications until mid-October. They may approve some, like BlackRock’s while asking Grayscale to modify its application to align with the accepted ones.

In correspondence with the SEC, Grayscale argues that the court’s logic already shows that the existing futures market oversight by the CME Group for Bitcoin futures ETFs is adequate. They emphasized a 99.9% correlation between the spot Bitcoin market and Bitcoin futures.

Market experts suggest that timing is crucial for investors who may see a sharp rise when the discount gap eventually closes. The narrowing of the gap may either happen suddenly or take several months to occur, based on the progression of the proceedings. Additionally, Bitcoin’s price could experience volatility during this time.

source