Grayscale ‘Encouraged’ by SEC Rulings Ahead of Bitcoin ETF Decision

The regulator is set to rule on the digital currency asset manager’s proposal to convert its bitcoin trust to an ETF by July 6

article-image

Grayscale CEO Michael Sonnenshein | Source: Shutterstock

share

key takeaways

  • Roughly 11,400 comment letters about Grayscale’s application have been submitted to the SEC since November
  • The investment vehicle has traded at a discount of roughly 30% to its net asset value in recent weeks

While crypto-focused asset manager Grayscale Investments is optimistic ahead of the SEC’s decision on giving the greenlight to the firm’s long-proposed conversion of its bitcoin trust to an ETF, the company’s CEO said it’s preparing for all possible scenarios. 

“We remain encouraged by the SEC’s actions over the past eight months, which have signaled an increased recognition of and comfort with the maturity of the underlying bitcoin market,” CEO Michael Sonnenshein said in a Monday letter to investors. 

The SEC approved the first ETFs to invest primarily in bitcoin futures contracts last October. The agency also last week gave the go ahead to a bearish vehicle managed by fund issuer ProShares designed to deliver the inverse performance of the S&P CME Bitcoin Futures Index.

Sonnenshein tweeted at the time that the latter approval shows bitcoin’s price discovery is supported by a derivatives market “robust enough” to offer short exposure to retail investors.  

The Grayscale Bitcoin Trust (GBTC), which has $13.5 billion of assets, is operationally ready to convert into an ETF when it is granted approval, Sonnenshein added. The investment vehicle has traded at a discount of roughly 30% to its net asset value (NAV) in recent weeks.

“But, as you know, the SEC continues to prohibit spot-based ETFs from coming to market, so the Grayscale team has been preparing for all possible post-ruling scenarios,” he said in the Monday letter.

Grayscale earlier this month hired Donald B. Verrilli, Jr. as a senior legal strategist to work alongside Grayscale’s in-house counsel and its attorneys at Davis Polk & Wardwell. Verrilli was the 46th solicitor general of the United States, serving from 2011 to 2016, and also previously worked as deputy counsel to former President Barack Obama.

The company tweeted at the time that the addition was “to ensure that we have the strongest possible team of legal minds ready to support our BTC ETF application.” Grayscale executives have said they wouldn’t rule out a lawsuit if the application is denied.

Roughly 11,400 comment letters surrounding the conversion have been submitted to the SEC since November. More than 99% of them have been in support of the application, according to Grayscale. 

James McClave, a trader for Jane Street, wrote earlier this month that GBTC’s discount to NAV would likely dissipate if the trust was allowed to become an ETF, benefitting the investment product’s investors. Jane Street is a quantitative proprietary trading firm and liquidity provider that prices more than 5,000 ETFs globally — and has a robust crypto trading business. 

“Based on our experience trading in both the spot and listed derivatives markets for bitcoin, we believe there is a relatively deep and liquid spot bitcoin market that is well situated to support the listing and trading of bitcoin ETPs in the US,” McClave wrote. 

The SEC is slated to rule on a separate spot bitcoin ETF application from Bitwise Asset Management by week’s end. Chief Investment Officer Matt Hougan told Blockworks last week that recent events in the broader crypto markets, such as the collapse of Terra’s UST and LUNA, could impact the regulator’s decision on that and similar products.

Bitcoin traded around $21,000 Monday afternoon, down about 70% from all-time highs last November.   
A number of industry watchers do not expect a spot bitcoin ETF to launch until 2023 — at the earliest.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

“There is plenty of space for more than one institutional crypto offering,” Kraken exec says

article-image

Individual cryptocurrencies may well jump in value during the next bull run, but the market overall has pumped less and less every time

article-image

After seeing record trading volumes Monday, IBIT trade volumes soar again as bitcoin price rally continues

article-image

Get over it. Of course Bitcoin will survive. The real question: Which miners will thrive?

article-image

Do Kwon may miss the start of the March 25 trial in the SEC’s case against the former executive and Terraform Labs

article-image

Riot Platforms bought 31,500 more mining machines while CleanSpark has begun operating in Mississippi