The Grayscale Bitcoin Trust (GBTC) has faced a rollercoaster ride in the past year due to crypto market fluctuations. One of the major factors contributing to this uncertainty was the Genesis Trading bankruptcy, which affected companies under the Digital Currency Group (DCG) umbrella, including GBTC. However, as the market moved on from this event, the trust has shown signs of improvement, with the discount starting to shrink.
During the crypto winter of 2022, the GBTC experienced a widening discount to Net Asset Value (NAV) over several months. At its peak, the discount reached almost 50%, meaning that investors in the trust held BTC at a significantly lower price compared to the spot market value.
However, as Bitcoin made a remarkable recovery in 2023, almost doubling its value from the lows of 2022, the GBTC also embarked on a recovery trajectory. As of now, the discount has been reduced by almost half in just six months. Recent data from YCharts reveals that the Grayscale Bitcoin Trust discount currently stands at 28.24% as of July 10, 2023.
Based on its performance over the years, Grayscale has proposed transforming the trust into a Spot Bitcoin ETF. Despite presenting compelling arguments, the United States Securities and Exchange Commission (SEC) remains firmly opposed to this idea.
Grayscale has made two attempts to convert GBTC into a Spot Bitcoin ETF, but the regulator has rejected their filings on both occasions. Following the second rejection in June 2022, Grayscale took legal action against the SEC and has since continued to fight for their cause.
In their latest move, Grayscale has filed a letter with the DC Circuit challenging the SEC’s decision. This time, the focus is on the approval of Leveraged Bitcoin ETFs while denying approval for Spot Bitcoin ETFs.
Grayscale’s filing on July 10 emphasizes that although Leveraged ETFs carry higher risk compared to Spot ETFs, the SEC has granted approval for the former while rejecting the latter. Lead Counsel, Donald B. Verrilli Jr., highlighted that the SEC’s approval of the Volatility Shares’ 2x Bitcoin Strategy ETF (BITX) exposes investors to a riskier investment product than traditional bitcoin futures exchange-traded products (ETPs).
Verrilli called the SEC’s rejections of Spot BTC ETFs “discriminatory.” However, he suggests that the regulator could rectify this by allowing proposed Spot Bitcoin ETPs, such as Grayscale’s, to commence trading.
In summary, the Grayscale Bitcoin Trust (GBTC) has faced challenges but has shown signs of recovery as the market moves forward. Grayscale’s efforts to convert GBTC into a Spot Bitcoin ETF have been met with resistance from the SEC, leading to legal action. Their latest move involves contesting the SEC’s approval of Leveraged Bitcoin ETFs while denying Spot Bitcoin ETFs. Grayscale argues for a fair playing field, urging the SEC to allow proposed Spot Bitcoin ETPs to enter the market. The future of GBTC and its transformation into a Spot Bitcoin ETF remain uncertain, with the legal battle ongoing.