After years of struggle, Grayscale, a cryptocurrency asset management company, has finally received approval from the U.S. Securities and Exchange Commission (SEC) for its GBTC Bitcoin spot ETF application. As a result, the GBTC premium has narrowed to near zero today, reaching a level comparable to the spot price since February 2021.
The SEC approved 11 Bitcoin spot ETFs, including Grayscale’s GBTC Bitcoin spot ETF application, which officially started trading last night. The total trading volume of Bitcoin spot ETFs on the first day exceeded $4.6 billion, with GBTC having the highest trading volume of $2.32 billion, accounting for nearly half of the total.
According to Bloomberg analyst James Seyffart, a significant portion of this trading volume is from selling GBTC and purchasing other ETFs. The reasons for the sell-off could be attributed to the disappearance of the long-standing premium, users taking profits, or concerns over the high management fees of GBTC. In other words, not all of the trading volume necessarily represents new capital inflows.
It is worth noting that with the approval of the GBTC Bitcoin spot ETF application, YCharts data shows that the discount of GBTC relative to its net asset value (NAV) has narrowed to near zero, reaching -1.9% as of the time of writing. Since February 2021, the price of GBTC has been consistently lower than its held Bitcoin value and reached a historical low of nearly 50% discount in December 2022. However, the hope for the approval of the GBTC Bitcoin spot ETF application was reignited last summer when Grayscale won the lawsuit against the SEC, leading to a significant narrowing of the GBTC premium.
Sean Farrell, the director of digital asset strategy at FundStrat, stated that GBTC approaching NAV is a relief for the cryptocurrency field and a symbol of the industry entering a new stage of maturity. Due to obvious reasons, GBTC has caused a lot of unnecessary pain in the market in recent years.
The previous discount was due to the nature of the fund. GBTC operates similarly to a closed-end fund, which means it lacks an intrinsic arbitrage mechanism and does not allow market makers to create or redeem shares. Looking ahead, Matt Kunke, a cryptocurrency research analyst at GSR, believes that the future premium/discount will be minimal now that GBTC has transitioned into a spot ETF, where authorized participants can purchase and redeem ETF shares based on the net asset value, thereby linking the ETF market price to its asset value.
Sean Farrell anticipates that with the potential approval of an Ethereum spot ETF by the SEC, Grayscale’s Ethereum Trust (ETHE) application may also pass, and it will be interesting to observe how the discount of ETHE (currently -11.48%) will change.
Related reports:
– “Bitcoin Spot ETFs Are Ready! Grayscale, Fidelity, Ark, Valkyrie… Submit ‘Securities Registration Form’ to SEC”
– “Competing for the Bitcoin Spot ETF Market: Goldman Sachs Aims to Become a Trading Underwriter for BlackRock and Grayscale GBTC (AP)”
– “Trading Strategies After ETF Approval: Analysts Say Funds Are Taking Profits, Indicating a Bitcoin Top”