The GBTC (Grayscale Bitcoin Trust) discount has narrowed to its lowest level in 22 months, indicating growing optimism for the conversion of the trust into an open-ended spot-based exchange-traded fund (ETF). This development comes after the U.S. Securities and Exchange Commission (SEC) decided not to appeal against a court verdict that set aside its rejection of Grayscale’s attempts to convert the trust into an ETF.
On Friday, shares in GBTC traded at a discount of 15.87% to the trust’s net asset value, reaching a level not seen since December 2021. This discount has been steadily decreasing since reaching a record low of nearly 50% during the bear market in December of last year.
The SEC’s decision not to appeal the court’s verdict has raised hopes that the regulator may be reconsidering its position on Grayscale’s ETF conversion. While there is still a possibility that the SEC could come up with new reasons to reject the bid or request an en banc appeal, experts believe the probability is low, considering the regulator’s recent engagement with other spot-ETF applications.
The market speculates that the SEC’s decision not to appeal could pave the way for a potential spot ETF launch in January 2024, with Grayscale potentially taking the lead over other issuers. Nate Geraci, president of the ETF Store, voiced a similar opinion, suggesting that Grayscale’s ETF conversion could occur early next year.
The potential approval of a spot-based ETF is highly anticipated as it could attract billions of dollars in mainstream money into the crypto market. Several prominent companies, including BlackRock, Fidelity, Invesco, Valkyrie Investments, WisdomTree, and VanEck, have already filed for spot bitcoin ETFs with the SEC, following BlackRock’s lead.
While the outlook appears positive, industry experts caution that the inflow of mainstream money into the market may not be immediate. Coinbase Institutional, a major cryptocurrency exchange, expects the flows to materialize gradually over time.
Overall, the narrowing of the GBTC discount and the SEC’s decision not to appeal the court’s ruling are signs of increasing optimism for the conversion of Grayscale’s trust into an ETF. If this conversion does occur, it could significantly impact the crypto market and open the floodgates to substantial mainstream investment.