YEREVAN (CoinChapter.com) – Grayscale Bitcoin Trust, the largest Bitcoin investment vehicle globally, made headlines again, as its stock GBTC was trading at a 10.3% discount to the Trust’s net asset value (NAV) on Nov. 13, the narrowest discount since July 2021.
Notably, the hype over Grayscale’s intentions to launch an Ethereum-based spot exchange-traded fund (ETF) and its ambitions to convert the Bitcoin Trust into an ETF exacerbated bullish expectations.
The GBTC Discount Update, As of Late
Grayscale Investments had $23.1 billion in assets under management (AUM) as of Nov. 13, a whopping 32% increase since Oct. 19. The reserve’s valuation surged in sync with Bitcoin’s 30% price appreciation to $36,800.
As mentioned, the Trust displayed a 10.3% discount for GBTC. Grayscale holds $33.4 worth of Bitcoins per share in their treasury. However, stock market traders can buy the same Bitcoin-backed GBTC share for $29.9, or 10.3% less than the Grayscale holding price per share.
Notably, the discount typically appears in bear markets, i.e., when enough traders sell their GBTC, the stock’s actual value is less than the Bitcoin Grayscale has in its GBTC Trust. As mentioned in the previous GBTC review, Martin Leinweber, a digital asset product strategist at MaretVector Index, commented on the significance of the discount to NAV narrowing year-to-date.
When the discount narrows, it suggests that investors are becoming more confident in the trust or that demand for the shares is increasing. If the discount narrows significantly or disappears completely, it could lead to a substantial return for investors.the strategist explained.
ETF Hype and Its Impact on GBTC Discount
The current trend of a decreasing discount may reflect growing investor confidence in GBTC or an increased appetite for its shares. This trend, if sustained, could potentially lead to significant returns for investors. Despite this positive trend, the US Securities and Exchange Commission’s (SEC) decision to convert Grayscale’s Bitcoin fund into an ETF remains uncertain.
Regulatory Challenges and Future Outlook
Experts from Bloomberg Intelligence suggest that SEC Chair Gary Gensler may approve multiple ETF applications shortly, even before 2024.
This anticipation stems from the ongoing legal dispute between Grayscale and the SEC, where Grayscale challenged the SEC’s initial denial of their ETF application. Considering similar requests from major financial entities, the SEC has delayed its decision, setting the stage for potential approvals in the coming years.
Furthermore, Grayscale has also filed to convert its Ethereum-based product, the Grayscale Ethereum Trust (ETHE), into a spot ETF. This move is similar to their efforts with the Grayscale Bitcoin Trust, aiming to offer a product that tracks the spot price of Ethereum directly.
Like the Bitcoin ETF, the conversion of the Ethereum Trust into a spot ETF is subject to regulatory approval, which is a significant hurdle given the cautious stance of the SEC towards cryptocurrency ETFs.
The diminishing GBTC discount presents an intriguing opportunity for those considering Grayscale investment. However, investors should closely monitor regulatory developments, as the approval of Grayscale’s ETF conversion could significantly impact the investment landscape.