Grayscale Bitcoin Remittance Shrinks As Court Ruling Approaches

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(Bloomberg) – Crypto investors appear to be the most optimistic in over a year about the chances of the world’s largest Bitcoin investment product being allowed to be turned into an exchange-traded fund.

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Grayscale Bitcoin Trusts’ $18.8 billion discount to its net asset value shrunk to around 25% on Thursday, ahead of a much-anticipated court ruling on Grayscale Investments to convert it into an ETF. The difference is the smallest since May 2022.

The trust effectively operated as a closed-end fund that did not redeem shares, which left the trust trading at over 40% discounts to its underlying Bitcoin. The structure of an ETF makes it possible to create and redeem shares to follow the evolution of demand.

The SEC rejected Grayscales’ plan to convert the Bitcoin trust into an ETF last year, saying crypto markets are too ripe for fraud and manipulation. Grayscale filed a lawsuit, asking the DC Circuit Court of Appeals to overturn a decision the company called arbitrary and discriminatory because the SEC had already approved ETFs that track Bitcoin futures.

Elliott Stein, senior litigation analyst at Bloomberg Intelligence, estimates that a decision on the Grayscales lawsuit will come no later than the end of September, given that the closing arguments took place in March.

The DC Circuit Court issues its notices Tuesdays and Fridays, around 11 a.m., each week, he said. I expect that could happen anytime now on those days.

The rebate narrows on the hope that GBTC will convert to an ETF either following a grayscale lawsuit with the SEC or the prospects that one or all of the other eight Spot Bitcoin ETF applications will gain SEC approval, said Bloomberg Intelligence analyst James Seyffart.

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Bloomberg Intelligence analysts predict Grayscale has a 70% chance of winning its lawsuit against the SEC, an improvement based on judges’ questions during closing arguments.

Separately, they predict there’s a 50% chance the SEC will approve a spot Bitcoin ETF, after recent waves of applications from BlackRock Inc. and others.

It’s encouraging to see increased momentum in bitcoin adoption, said Michael Sonnenshein, chief executive of Grayscale. Our team remains operationally ready and committed to converting GBTC into a spot Bitcoin ETF, and eagerly awaits a decision from DC Circuit.

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