Those closely following the quest for an exchange-traded fund that would hold Bitcoin have Friday circled on their calendars.
That’s when a DC court will issue a mandate that could make effective an August opinion that went in favor of Grayscale Investments LLC, which had sued the US Securities and Exchange Commission as it looked to convert its Bitcoin Trust (GBTC) into an ETF, according to Bloomberg Intelligence analysts Elliott Stein and James Seyffart. It’s the next step in the process after the SEC last week opted against appealing the previous ruling, which it had lost.
“We are waiting on some sort of announcement or just additional information from the SEC, Grayscale, or possibly the courts on what happens next,” said Seyffart. “The full next steps can’t truly be known because this is a first-of-its-kind situation.”
Any progress on the Grayscale conversion front can bring further clarity to the ETF-approval process, which has remained opaque to industry watchers as many were unsure about how the SEC would handle the asset manager’s proceedings, as well as the numerous other outstanding applications. Crypto investor Michael Novogratz said on Wednesday that he expects the SEC to approve a Bitcoin ETF this year.
Grayscale has argued that the conversion of GBTC into an ETF could unlock billions in value for its holders. Its court win was seen as monumental for the industry because it sparked excitement within the digital assets community that a Bitcoin ETF could, after a decade-long battle, finally be had in the US. The SEC had been hesitant in the past to give a green light. But there are currently a slew of companies, including BlackRock Inc. and Invesco, among others, trying to get such a product launched. Novogratz’s Galaxy Digital is partnering with Invesco on a proposal.
Bloomberg Intelligence posits that the most likely scenario in terms of how the race might pan out is that Grayscale’s application is approved at the same time as those of other issuers like BlackRock. ARK Investment Management’s Cathie Wood has made a similar argument recently, saying that the SEC could green-light multiple applications at once.
Excitement around Grayscale’s conversion process has helped its Bitcoin trust rally. GBTC is currently trading about 14% below the value of its underlying holdings, the narrowest such reading going back to 2021, according to data compiled by Bloomberg. The discount stood near 50% earlier this year. The shares of the trust have more than doubled this year.
Still, plenty within the overall process remains murky. Cryptocurrency prices were whipsawed earlier this week after a false report purported that the SEC had approved a spot Bitcoin ETF, with tokens reversing gains following a debunking of the headline. Though the episode suggested there’s excitement around a potential Bitcoin fund, it also underscored how the entire market can be moved by an unverified tweet.
“This event revealed a couple of key insights: (1) the ETF is clearly not priced in, as evidenced by the market’s reaction to the false headline,” wrote Sean Farrell, head of digital asset strategy at Fundstrat. “And (2) the amount of capital flow needed to significantly move Bitcoin in this market is relatively low, as demonstrated by the sharp price movement on relatively muted volumes and inflows.”
Bitcoin was little changed at around $28,200 on Wednesday. That’s less than half its record high of almost $69,000 reached in late 2021.
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