Grayscale Bitcoin Trust, or GBTC, saw its share price rally almost 9% Tuesday, after a panel of judges appeared to be skeptical about the U.S. Securities and Exchange Commission’s arguments during an appeals court hearing, as Grayscale continues its push to convert GBTC into an exchange-traded fund.
Judges at the District of Columbia Circuit Court of Appeals in Washington, D.C., asked SEC senior counsel Emily Parise details about the connections between bitcoin
BTCUSD,
spot and futures and markets, and questioned the agency’s argument that bitcoin futures ETFs would be more resistant to manipulation than spot bitcoin ETFs, according to a live recording of the hearing.
In June, Grayscale filed a lawsuit against the SEC over the agency’s denial of an application to convert GBTC
GBTC,
into an ETF. The SEC has greenlighted several bitcoin futures-backed ETFs, but has yet to approve any ETFs backed by the cryptocurrency itself, citing concerns about market manipulation.
The lawsuit filed by Grayscale is under the spotlight as it may shed light on whether and when a spot bitcoin ETF might be available in the U.S. Meanwhile, a successful conversion of GBTC into an ETF would help mitigate the discount GBTC has been trading at to its net asset value, or the value of bitcoins it holds.
Launched in 2013, GBTC traded at a premium to its net asset value for several years, as it was for a long time the only public-listed fund that holds bitcoin as its primary assets. The premium flipped to a discount in February 2021, partly due to the launch of the first spot bitcoin ETF in Canada. However, investors can only sell, but not redeem their shares in the fund, in part as GBTC was structured similar to a close-end fund.
To close the discount, Grayscale had lobbied the SEC and finally filed a lawsuit against the agency to push for a conversion from GBTC into an ETF. For an ETF, institutional traders can keep creating and redeeming shares, thus closing the gap between the fund’s price and the value of its underlying assets through arbitrages.
“We look forward to the Court’s final decision, and strongly believe that American investors deserve to have equal access to the Bitcoin ETF product that best suits their needs,” a Grayscale spokeswoman wrote to MarketWatch in an email.
Representatives at the SEC didn’t immediately respond to a request seeking comment.
