- U.S. Securities and Exchange Commission seeks public opinion on Grayscale’s Bitcoin ETF application
- Outside chance that Grayscale will succeed in listing its ETF given that it’s the only applicant that is also currently already holding on to Bitcoin and US$27 billion of it for that matter
Your view matters – at least that seems to be what the U.S. Securities & Exchange Commission is saying as the regulator inquires whether Bitcoin ETFs directly linked to the cryptocurrency could be vehicles for fraud.
Given that the U.S. government was able to track down the proceeds of a Bitfinex hack from six years ago, the argument that cryptocurrencies can be used to obfuscate all manner of nefarious or illicit activity is increasingly ringing hollow.
Last Friday, the SEC issued a notice calling for members of the public to submit written comments regarding Grayscale Investments’ application to covert its Grayscale Bitcoin Trust (GBTC) into a full-fledged ETF tied to Bitcoin’s spot price.
In a universe of Bitcoin ETF applications, Grayscale’s stands out as the longest-standing institutional Bitcoin product.
Given the inefficiencies and idiosyncrasies of Grayscale’s US$27 billion Bitcoin trust, converting it into a full-fledged ETF might not be an entirely bad idea.
For starters, unlike other ETF applications, GBTC is already holding Bitcoin, and it wouldn’t be a case of having to go out and acquire the cryptocurrency and custody it.
GBTC also has tracking errors, often attracting a premium or a discount versus the underlying spot price of Bitcoin, depending on market conditions, this is because investors can’t actually buy or sell trust shares of GBTC to the open market but need to do so with another investor.
Since 2013, GBTC has been a key means by which financial institutions gained exposure to Bitcoin, which has historically contributed to the premium that it traded at compared to Bitcoin’s actual price.
But now, with the launch of ETFs backed by cash-settled Bitcoin futures now available on Wall Street, GBTC, which is ironically the only institutional instrument that actually contains Bitcoin is trading at a discount.
While most analysts expect that Grayscale’s Bitcoin ETF application will be denied, it’s the only one that is contextually different from all previous applications – it is already holding on to “physical” Bitcoin and that may provide an outside chance for its approval.
