At the center of the Grayscale-SEC farce is Grayscale Bitcoin Trust (GBTC) the world’s largest Bitcoin fund which has been trading at a steep discount to its crypto holdings for two years. This caused a lot of pain in the market.
But GBTC’s discount to NAV narrowed slightly to 42% just days before the much-anticipated fight. According to YCharts, the GBTC discount has been reduced slightly to 42.11%. That figure hit 47.35% on February 13. The narrowing may reflect investor sentiment toward the lawsuit ending in Grayscale's victory.
The company filed with the SEC in October 2021 to convert GBTC into an exchange-traded fund (ETF). The regulator has approved a variety of futures-backed crypto products, but has repeatedly dismissed spot products.
Grayscale decided to sue the SEC last summer, hours after the regulator rejected the asset manager's planned switchover. The company's flagship product, the Bitcoin Trust, launched in 2013 and has $14.8 billion in assets. It trades at a deep discount, which prompted Grayscale to come up with a solution, converting it into an ETF. The company expects this move to reduce the discount on GBTC by introducing liquidity.
According to a filing with the U.S. Court of Appeals for the District of Columbia Circuit, Grayscale argued that the SEC had failed to “apply a consistent approach to similar investment vehicles,” given the existence of futures-backed bitcoin ETFs. On the other hand, the agency continues to insist that bitcoin futures funds and spot funds are different, with “fundamental differences in their ability to detect and deter fraud and manipulation.”
However, former U.S. Attorney General Donald Verrilli Jr., who joined Grayscale as a legal strategist, believes that the exact same protections exist in spot market ETFs. In a recent interview, Verilli explained,
“It’s just a typical case, and similar cases are treated differently. When you put it side by side, it really comes out. The order issued by the SEC approving a bitcoin futures ETF, and in our case not approving our spot The ETF orders ... they just contradict each other." Elliott Stein, senior litigation analyst at Bloomberg Intelligence, said the fight with the SEC has been an "uphill battle" for Grayscale. He explained that the committee had clarified the criteria for approving bitcoin-based ETFs, which Stein said should reduce fraudulent activity by “arbitrary and capricious” surrounding “whether exchanges have oversight agreements with large regulated markets.” " test. concern. "
The agency points to all the failed cryptocurrency exchanges, especially FTX, and the controls these entities put in place to protect consumers as an illustration.
Bloomberg Intelligence puts Grayscale at a 40% chance of winning. If the asset manager wins, it could open the floodgates to a flood of institutional money and unlock billions of dollars in value for GBTC investors.
