Crypto exchange funds provider Grayscale has been in litigation against the U.S. Securities and Exchange Commission (SEC) since June of last year. The financial regulator subsequently denied Grayscale’s request to convert the world’s largest Bitcoin (BTC) fund, GBTC, into one exchange traded fund (ETF).
It was announced yesterday that Grayscale had won the lawsuit and investors flocked to the GBTC fund.
Discount GBTC bThe Itcoin fund is declining
According to Yahoo Finance, volume topped $19.5 million yesterday, the highest amount since June 2022. GBTC’s price rose a little over 20%, while regular bitcoin gained about 8%.
The win therefore had a bigger impact on GBTC itself than the Bitcoin price. This is because GBTC does not directly follow Bitcoin’s price, but mostly highly correlates with it. GBTC generally trades at a higher or lower price than Bitcoin on spot markets.
That difference can add up. For example, the historic “premium” at the start of 2018 was still almost 80% above price, according to data from Coinglass. That was because at the time there were few options for institutional investors in the US to invest in Bitcoin. Because GBTC is listed on Nasdaq, large institutions can invest in the fund.
But now that the crypto market has had, and may still be in, a major bear market, GBTC has been discounted by around 48%. Due to the upward trend of the last few months, the discount has now fallen to just 18%. After yesterday’s positive news, the discount decreased by 5% in one day.
Bitcoin spot ETF not yet approved
The exchange fund is currently what’s known as a trust fund, but Grayscale has wanted to convert it to a spot ETF for several years. A spot ETF closely follows the regular bitcoin price, which means the premium and discount disappear when the fund converts.
Now that Grayscale has won the lawsuit, there is hope that the fund will still be approved. Unfortunately, that is not certain yet, because the victory in the courtroom only means that the application process will be resumed. This means that the application for a Bitcoin ETF itself has not yet been approved.