The bitcoin price at Grayscale’s stock traded trust, GBTC, has fallen to $12,000 per BTC, far lower than the global market rate of $19,000.
The discount has now widened to 34% amid a market rout while the trust looks to become a freely traded ETF.
The crypto friendly SEC commissioner Hester Peirce made the argument for an approval of Grayscale’s bitcoin spot ETF application on Tuesday, stating:
“It is time for the Commission to stop denying categorically spot crypto exchange-traded products.”
Whether SEC’s chair Gary Gensler will listen remains to be seen with a deadline of July 6th for a rejection or letting it pass.
“The entire Grayscale team is reading this,” said Craig Salm, Chief Legal Officer at Grayscale, while referring to Hester’s speech, adding:
“This speech precisely delineates why our team is working to convert GBTC to a spot bitcoin ETF – told from the perspective of a top regulator that actively engages with the crypto industry.”
An approval of Grayscale’s bitcoin ETF, which arguably has the right to first debut since they’re the biggest of its kind, would erase the discount because then you can arbitrage.
Currently if you mint shares by depositing bitcoin, you have to wait six months to redeem the bitcoin by in effect burning shares. Why more of this redemption is not being done at this stage isn’t too clear, but they might be waiting to ETF.
In addition some redemption has been carried out as Grayscale had 655,000 bitcoin at its peak in February 2021. Now they have 639,000, worth $12 billion.
There’s clearly been less demand for their shares however amid increasing competition from freely traded ETPs and ETFs in Europe and Canada.
So much so that the matter might even be sufficiently existential for Grayscale to even sue the Securities and Exchanges Commission for abusing its mandate by interfering in picking winners and losers in the market when they’re obviously meant to be neutral.
The ETF may well be approved therefore, but it’s not clear how much difference it will make at this stage beyond closing the discount.