Grayscale Bitcoin Trust’s shares were trading at an unprecedented 35% discount. Bitcoin ETF.
The situation is ironic, given that existing concessions are one of greyscale’s primary arguments for why the transition should take place. Last month, the company held a private meeting with the SEC, according to one CNBC The report, in which it argued that converting its Bitcoin Trust (which trades as GBTC) to an ETF could potentially unlock $8 billion for investors by eliminating the difference.
Back then, GBTC shares traded at a roughly 25% discount against the firm’s underlying bitcoin, meaning GBTC was 25% less expensive to buy than the bitcoin it represented. That discount is as wide as 35%, based on Greyscale’s net asset value calculation last night. Specifically, its market price per share was just $13.32, while Bitcoin was worth $18.62 per share.
Meanwhile, Bitcoin price continues to fall to around $19,000 now after the SEC rejected Grayscale’s ETF application. This has helped bring Grayscale’s total share value somewhat closer to parity with its Bitcoin holdings, as the latter’s value declines.
An ETF is a type of investment vehicle that provides indirect exposure to an asset such as gold without the need to own and store the asset. A Bitcoin ETF allows exposure to the asset for investors who are uncomfortable handling cryptocurrency directly, as well as being restricted from buying Bitcoin directly from an internal charter.
Grayscale is the world’s largest crypto asset management company. Its Bitcoin Trust had about $12.9 billion in assets under management as of Wednesday.
But many investors consider GBTC a less than ideal investment vehicle for bitcoin exposure. Unlike an ETF product, it is not easy to create or acquire shares of GBTC in response to Bitcoin’s market movements. This is why the supply and demand for GBTC shares can vary widely from Bitcoin at any given time, creating price variations.
GBTC is now trading at just $12.28–or 0.00064 BTC–per share.
Grayscale CEO Michael Sonnenschein has campaigned publicly and privately since October to persuade the SEC to allow Grayscale’s transition. Funding efforts began after the first bitcoin futures ETF was approved last year, raising confidence that a spot ETF would soon follow. A spot ETF tracks the price of bitcoin in real time, while futures ETFs are derivatives regulated by the CFTC that bet on what the price will be at a later date.
SEC Chairman Gary Gensler remains opposed to sporting market bitcoin ETFs, often citing market manipulation and consumer protection concerns. Grayscale sees it differently and believes that Gensler and the SEC are unfairly “discriminating” against Bitcoin. After the SEC’s latest rejection, the company immediately announced a lawsuit against the commission for “failing to apply consistent treatment to similar investment vehicles.”
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