Grayscale Bitcoin Trust shares rose again for the second day. This brings their gain to 12.5%.
The trust trades under the ticker GBTC and is quoted at $13.24 per share. This represents a 34% discount on the value of bitcoins it holds, the narrowest gap since Sept. 22, Bloomberg data shows.
At the beginning of the week, the discount was 42.11%. A panel of judges from the Circuit Court of Appeals in the District of Columbia expressed skepticism over SEC arguments in defense of Grayscale’s June application to convert GBTC into an exchange-traded funds. They also questioned why the agency considered bitcoin futures prices more susceptible to manipulation than the spot markets upon which the ETF would rest. Grayscale’s fund, which holds bitcoin directly, was rejected by the SEC several times. However, it has been approved for bitcoin futures ETFs in the past.
An ETF conversion would enable anyone to purchase shares. This is in contrast to the current limit for accredited investors, and with a minimum six month holding period. The massive discount would be eliminated, which would unlock $5.5 billion worth of value.
CEO Michael Sonnenshein says, “We walked out of courtroom feeling really encouraged by the arguments and hopeful that they would be persuasive to court.”
Grayscale’s chances of winning have increased as analysts echo the sentiment. In a recent note, Elliott Stein, Bloomberg’s senior litigation analyst wrote that while the SEC was considered 60% more likely to win argument, Grayscale now appears 70% more likely to win.
Vasu Nigam is a regulatory and policy fellow at Bain Capital Crypto. he wrote that the judges were ‘comfortable with Grayscale’s arguments. He states that while it’s difficult to predict the outcome of any given case, this win will be a tough one for the SEC.
Grayscale’s win does not necessarily mean that Grayscale’s ETF application will get approved. Stein writes that ‘the court’s language is key. The court is likely to send the case back to the SEC to review its reasoning. This could include a better distinction between language in prior orders that approved futures-based Bitcoin ETFs and the Grayscale rejection order. This could prolong things.
Jennifer Rosenthal, Grayscale spokesperson, stated that the firm anticipates a verdict in fall.
filed a lawsuit on Grayscale’s behalf. It was brought by Alameda Research, an affiliate of FTX. The suit alleges that Grayscale charged ‘exorbitant management fee in violation of Trust agreements’ and totaled $1.3 billion.
Sonnenshein said Forbes that the lawsuit was a misguided one. Although I understand that Alameda’s new management team is trying to get assets back for short-term gains, the lawsuit does not reflect the work being done to convert GBTC into an ETF. This, according to all parties, will unlock the greatest value for shareholders and provide the best long-term product structure.