Grayscale Bitcoin Trust’s Discount Narrows to 42%, Reaching One-Month High

Grayscale, the company responsible for the GBTC fund, faced the US Securities and Exchange Commission (SEC) in a US court on March 7, 2023. The outcome of the hearing was that the chance of the fund converting into an ETF is now higher than before, with the grayscale item before a correction up by 22%.

GBTC currently owns more than 3% of all existing bitcoins in the world, with the value of these 643,572 bitcoins coming close to 75 billion reais in direct conversion. Due to the difficulty of withdrawals, GBTC has a 42.11% discount to Bitcoin.

The SEC had previously denied approval of converting the GBTC fund to a spot Bitcoin ETF, citing concerns that the cryptocurrency market can be easily manipulated. Grayscale decided to sue the SEC last year, claiming that the SEC was acting in an arbitrary and erratic manner.

Grayscale’s arguments seem to have convinced the judges in the case, with the biggest one being that Bitcoin futures ETFs are already approved, meaning there’s no reason why a spot ETF shouldn’t be. Judge Naomi Rao agreed on this issue and questioned the SEC’s position.

Meanwhile, FTX affiliate Alameda Research sued Grayscale, claiming that Grayscale’s redemption costs, both Bitcoin and Ethereum funds, are too high. In response, a Grayscale spokesperson stated that the process is “misguided”. The defense correctly commented on efforts to convert the fund into an ETF, which would reduce the aforementioned fees.

The rise of GBTC on March 7 reflects hopes that Grayscale did well in US court. However, it is worth noting that the Grayscale fund was one of the pillars for the bankruptcy of several companies in the industry. Many players bought GBTC at a discount, believing they could take advantage of this difference, but the discount continued to increase as the same players had to sell their positions.

Gary Gensler, chairman of the Commission, continues to argue that Bitcoin is a commodity, and other companies such as Ark and WisdomTree have also been banned by the SEC. However, with the outcome of the hearing, the chance of the GBTC fund converting into an ETF is now higher, which could have significant implications for the cryptocurrency market.

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