Grayscale Bitcoin Trust trades 35% lower than BTC price after ETF denial

Shares in Grayscale Bitcoin Trust traded at an unprecedented 35% discount after the Securities and Exchange Commission rejected its request to transition to a cash market Bitcoin ETF.

The fact is ironic, as the existing discount was one of Grayscale’s main arguments why the transition had to happen. Last month, the company held a private meeting with the SEC arguing that converting its Bitcoin Trust (which trades as GBTC) into an ETF could potentially free up $8 billion for investors, according to a CNBC report , by eliminating the discrepancy.

Back then, GBTC shares were trading at a roughly 25% discount to the company’s underlying bitcoin, meaning it was 25% cheaper to buy GBTC than the bitcoin it represents. Yesterday, that discount rose to as much as 35% based on a calculation of Grayscale’s net asset value last night. While the bitcoin per share was $18.62, the market price of each share was only $13.32

Meanwhile, Bitcoin’s price has continued to fall, now to around $19,000, after the SEC rejected Grayscale’s ETF application. This has helped bring Grayscale’s overall stock value a little closer to parity with its bitcoin holdings as the latter’s value falls.

An ETF is a type of investment vehicle that offers indirect exposure to an asset like gold without the need to own and store the asset itself. A bitcoin ETF would allow investors uncomfortable with directly managing cryptocurrencies to gain exposure to the asset, along with companies that might be barred from buying bitcoin directly by an internal charter.

Grayscale is the largest crypto asset management company in the world. His Bitcoin Trust has nearly $12.9 billion in assets under management as of Wednesday.

But many investors see GBTC as a less than ideal investment vehicle for Bitcoin exposure. Unlike an ETF product, GBTC shares are not easily created or redeemed in response to Bitcoin’s market movements. Because of this, the supply and demand for GBTC shares can differ wildly from that of Bitcoin at any time, resulting in price differences.

GBTC is now trading for just $12.28 – or 0.00064 BTC – per share.

Grayscale CEO Michael Sonnhenshein has been campaigning both publicly and privately to convince the SEC to approve Grayscale’s transformation since October. The fund’s efforts began immediately after the first-ever Bitcoin futures ETF was approved last year, inspiring confidence that a spot ETF would soon follow. A spot ETF would track the price of bitcoin in real-time, while futures ETFs are derivatives products regulated by the CFTC that bet on what the price will be like at a future date.

SEC Chairman Gary Gensler continues to oppose a sports market Bitcoin ETF, often citing concerns about market manipulation and consumer protection. Grayscale disagrees, believing that Gensler and the SEC are unfairly “discriminating” against Bitcoin. Following the SEC’s recent rejection, the company promptly announced a lawsuit against the commission because “similar investment vehicles were not treated consistently.”

Do you want to be a crypto expert? Get the best of Decrypt straight to your inbox.

Get the Biggest Crypto News + Weekly Roundups & More!

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers