Crypto investors appear to be the most optimistic in over a year about the odds of the world’s biggest Bitcoin investment product being allowed to be turned into an exchange-traded fund.
(Bloomberg) — Crypto investors appear to be the most optimistic in over a year about the odds of the world’s biggest Bitcoin investment product being allowed to be turned into an exchange-traded fund.
The $18.8 billion Grayscale Bitcoin Trust’s discount to its net-asset value has narrowed to around 25% as of Thursday, as a highly-anticipated court decision on Grayscale Investment’s bid to convert it into an ETF nears. The difference is the least since May 2022.
“What we’ve been guided by our attorneys is that we should expect a decision by the fall at the latest,” Michael Sonnenshein, chief executive officer of Grayscale, said during a Thursday interview on Bloomberg TV. Though it could come out of the court “any day,” he added.
The trust has effectively operated as a closed-end fund that didn’t redeem shares, which left the trust trading at discounts of more than 40% to its underlying Bitcoin. The structure of an ETF allows shares to be created and redeemed to keep pace with shifting demand.
The SEC rejected Grayscale’s plan to convert the Bitcoin trust to an ETF last year, saying crypto markets are too ripe for fraud and manipulation. Grayscale sued, asking the DC Circuit Court of Appeals to overturn a decision the company called arbitrary and discriminatory because the SEC had already approved ETFs that track Bitcoin futures.
Elliott Stein, senior litigation analyst at Bloomberg Intelligence, estimates that a decision on Grayscale’s suit will come no later than the end of September, given that the oral arguments occurred in March.
The DC Circuit Court posts its opinions on Tuesdays and Fridays, at about 11 a.m., weekly, he said. “I expect that it could come anytime now on those days.”
“The discount is narrowing on the hope that GBTC will convert to an ETF either on the back of Grayscale’s lawsuit with the SEC or on the prospects that one or all of the other eight spot Bitcoin ETF applications win approval from the SEC,” said James Seyffart, an analyst at Bloomberg Intelligence.
Analysts at Bloomberg Intelligence predict that Grayscale has a 70% chance of winning its lawsuit against the SEC, an improvement based on the judges’ lines of questioning during the oral arguments.
Separately, they predict that there’s a 50% chance that the SEC might approve a spot Bitcoin ETF, after recent waves of applications from BlackRock Inc. and others.
Grayscale will reduce fees for GBTC once it is converted into an ETF, Sonnenshein reiterated in the interview, though he didn’t specify by how much. The trust currently charges a 2% annual fee.
“It’s encouraging to see increased momentum in the adoption of Bitcoin,” said Sonnenshein. “Our team remains operationally ready and committed to converting GBTC to a spot Bitcoin ETF, and look forward to hearing a decision from the DC Circuit.”
–With assistance from Katie Greifeld and Scarlet Fu.
(Adds comment from Grayscale’s CEO, beginning in the third paragraph.)
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