Shares of the Grayscale Bitcoin Trust were trading at an unprecedented 35% discount after the Securities and Exchange Commission rejected its request to transition to a Bitcoin ETF in the cash market.
The circumstance is ironic, given that the existing discount was one of Grayscale’s main arguments as to why the transition needed to take place. Last month, the company held a private meeting with the SEC, according to a CNBC report, in which it argued that converting its Bitcoin Trust (which trades as GBTC) into an ETF could potentially unlock $8 billion for investors by closing the gap.
At the time, GBTC shares were trading at a discount of around 25% to the company’s underlying bitcoin, meaning it was 25% cheaper to buy GBTC than bitcoin. they represent. Yesterday, this discount reached 35%, according to a calculation of Grayscale’s net asset value carried out last night. Specifically, while its bitcoin per share stood at $18.62, the market price of each share was only $13.32.
Meanwhile, the price of bitcoin continued to fall, now falling to around $19,000, after the SEC rejected Grayscale’s ETF application. This helped bring Grayscale’s total stock value slightly closer to parity with its bitcoin holdings, with the latter declining in value.
An ETF is a type of investment vehicle that provides indirect exposure to an asset, such as gold, without the need to own and store the asset itself. A Bitcoin ETF would allow investors who are not comfortable with managing cryptocurrencies directly to gain exposure to this asset, as well as to societys who may be prevented from buying bitcoins directly by an internal charter.
Grayscale is the largest cryptocurrency asset management company in the world. His Bitcoin Trust holds nearly $12.9 billion in assets under management as of Wednesday.
But many investors consider GBTC not the ideal investment vehicle for bitcoin exposure. Unlike an ETF product, it is not easy to create or redeem shares of GBTC in response to movements in the bitcoin market. This is why the supply and demand for GBTC shares can vary significantly from those of bitcoin at any time, creating price gaps.
GBTC is now trading at just $12.28, or 0.00064 BTC per share.
Grayscale CEO Michael Sonnhenshein has been waging a public and private campaign since October to persuade the SEC to allow Grayscale’s conversion. The fund’s efforts began immediately after the first-ever bitcoin futures ETF was approved last year, raising hopes that a cash ETF would soon follow. See the article: Real-world conflict affects the virtual world: Metaverse cryptocurrencies plunge 12%.. A spot ETF would track the price of bitcoin in real time, while futures ETFs are derivative products, regulated by the CFTC, that bet on what the price will be at a future date.
SEC Chairman Gary Gensler remains opposed to an ETF in the bitcoin market, frequently citing market manipulation and consumer protection concerns. Grayscale sees things differently and thinks that Gensler and the SEC are “discriminating” against bitcoin unfairly. Following the latest SEC rejection, the company immediately announced legal action against the Commission for “failing to apply consistent treatment to similar investment vehicles.” »
Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.