Is GBTC going to be the US’s first spot bitcoin ETF (ETF)? Euphoria Starting six months backGrayscale was turned in, hinting at the possibility of suing the SEC for denial. Although the current climate indicates that the answer will likely be negative, Grayscale isn’t giving up. The company is determined to continue its efforts. CNBC, Grayscale “met privately with the Securities and Exchange Commission last week in an effort to persuade the regulator to approve the conversion of its flagship fund into an ETF.”
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The Grayscale Bitcoin Trust, also known as GBTC, “holds roughly 3.4% of the world’s bitcoin and is owned by more than 850,000 U.S. accounts, according to Grayscale.” For more than a year it has traded at around a 25% discount to BTC’s price. According to Grayscale, at the moment that the SEC approves the product’s transformation into an ETF, the discount will end and it will unlock “up to $8 billion in value for investors.”
Keep in mind that VanEck’s, BlockFi’sOther recent requests for spot bitcoin ETFs have also been turned down. Grayscale, who has applied to obtain one since 2017, is also eligible. Grayscale has been applying for one since 2017.
What would happen if the GBTC became an ETF?
To answer this question, Grayscale made “a 24-page presentation” for the SEC. Here are some graphs taken from this document The CNBC ReportAlthough in low resolution, In general, the GBTC’s transformation into a spot bitcoin ETF “would open them up to ordinary investors in a familiar wrapper that trades like a stock.”
The main argument from Grayscale is that a bitcoin futures ETF already exists, and the “SEC is discriminating against issuers” by not letting any company create a spot bitcoin ETF. “ Grayscale contended that a spot bitcoin ETF is “no riskier” than futures-based ETFs, because the two markets are both affected by the underlying price of bitcoin and track each other closely.”
Back in April Grayscale’s CEOMichael Sonnenshein felt even more litigious after he stated:
“If the SEC can’t look at two like issues, the futures ETF and the spot ETF, through the same lens, then it is, in fact, potentially grounds for an Administrative Procedure Act violation.”
The SEC visit and the threat of legal action have not been Grayscale’s only weapon. The following is an extract from Grayscale’s report CNBC, to help transform the GBTC into an ETF, “the investment firm has helped coordinate a public letter-writing push, flooding the SEC with more than 3,000 letters in support of its application.”
Source: GBTC/USD on TradingView.com| Source: GBTC/USD on TradingView.com
How would the Spot Bitcoin ETF affect The Market?
There are many opinions. There are institutions that can’t invest in bitcoin as an asset, but could definitely put their money in an ETF. Some believe that the sudden influx of funds that these people would bring would send bitcoin’s price to the moon. Unlike a future ETF which only holds future contracts, a spot ETF would have to buy the bitcoin it’ll represent. The money will therefore enter the bitcoin ecosystem.
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On the other hand, Bitcoiners don’t see what they deem as “paper bitcoin” with good eyes. The financial instrument would represent bitcoin, but the ETF isn’t the asset per se. These vulnerabilities expose the network to certain risks. The “paper bitcoin” could be considered inflation and something akin to fractional reserve banking is technically possible.
In all cases, the trigger is not in the hands of either group. Only the SEC has this power.
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