<\/p>\n
The court is set to deliver its ruling on Grayscale Investments\u2019 lawsuit against the US Securities and Exchange Commission. Regardless of the outcome, it holds the potential to significantly impact the company\u2019s flagship bitcoin trust and the discount at which its shares currently trade.<\/p>\n
Grayscale sued the SEC in June 2022 after the regulator blocked it from converting its Bitcoin Trust (GBTC) to an ETF. The firm had argued to the DC Circuit Court of Appeals that the SEC\u2019s approval of ETFs investing in bitcoin futures contracts, but not proposed products that would hold bitcoin directly, is \u201carbitrary and capricious.\u201d<\/p>\n
Eligible shares of GBTC \u2014 currently with $16.2 billion in assets \u2014 are quoted on OTC Markets Group\u2019s OTCQX<\/a>. Those shares have traded at a premium or discount to the value of bitcoin held by trust as demand for the product fluctuates.<\/p>\n Read more:<\/strong> First bitcoin futures ETF nears $1B on first day of trading<\/a><\/p>\n GBTC was trading at a 26% discount to its net asset value (NAV) on Friday, according<\/a> to YCharts.com. It had fallen to just below 24% on Aug. 14 \u2014 down about 20 percentage points from roughly 44% on June 13.\u00a0<\/p>\n \u201cThe strong narrowing of it shows how the perceived likelihood of an ETF spot approval in the US in the future strongly increased, pushing investors to buy the GBTC at a strong discount, believing in a future ETF listing,\u201d Fineqia research analyst Matteo Greco said in a Monday research note.\u00a0<\/p>\n Chase White, senior research and policy analyst at Compass Point Research & Trading, anticipates that the GBTC discount might \u201cclose significantly\u201d following a Grayscale victory, perhaps narrowing to as much as 10%.<\/p>\n \u201cHowever, we don\u2019t think it\u2019ll close entirely because we think in the days [or] weeks following the decision, the market will begin to digest the fact that Grayscale\u2019s win does not mean immediate approval to convert GBTC into an ETF,\u201d he told Blockworks.\u00a0<\/p>\n Read more: <\/strong>Grayscale win over SEC might not change much, industry watchers say<\/a><\/p>\n The court will likely require the SEC to re-review Grayscale\u2019s application, forcing the crypto asset manager to re-apply with the regulator. That process could take up to 240 days \u2014 a procedure other prospective spot bitcoin ETF issuers are in the midst of<\/a>.\u00a0<\/p>\n Bloomberg Intelligence analyst James Seyffart said an official announcement and timeline of a GBTC conversion to an ETF would send GBTC to \u201ca near-zero discount.\u201d<\/p>\n The main reason for GBTC\u2019s discount is Grayscale\u2019s inability to simultaneously redeem and issue shares, White explained \u2014 allowing the discount to NAV to be arbitraged away in real-time.\u00a0<\/p>\n \u201cThere\u2019s no mechanical reason the discount would disappear entirely before the SEC approves the conversion to an ETF and Grayscale starts actively issuing [and] redeeming shares,\u201d White added. \u201cAlso, the threat of an SEC appeal could dampen the positive sentiment once that reality sets in.\u201d<\/p>\n Should the DC Circuit Court of Appeals rule in favor of the SEC, industry watchers said the specifics of the decision will be key.\u00a0<\/p>\n The court accepting the SEC\u2019s concerns about market manipulation as valid \u2014 giving it reign to reject spot bitcoin ETFs \u2014 would likely drive a bigger discount than if it ruled Grayscale\u2019s application was \u201csimply deficient\u201d as it currently stands, White said.\u00a0\u00a0<\/p>\n GBTC reached a record discount to NAV of nearly 50% in December 2022.\u00a0<\/p>\n \u201cIt wouldn\u2019t be crazy to see it head in that direction again if Grayscale loses,\u201d Seyffart said.\u00a0<\/p>\n Greco told Blockworks that while a Grayscale loss would result in many investors selling shares of the trust, he doesn\u2019t expect the discount to return to the 40%-plus level.<\/p>\n The DC Circuit Court of Appears ruling is imminent, and some expect it to be very soon.<\/p>\n In fact, Bloomberg Intelligence analyst James Seyffart had predicted the ruling to come on Aug. 15, a date he called \u201can educated guess.\u201d<\/p>\n On Aug. 10, Scott Johnsson, a general partner at Van Buren Capital, said in a post on X, formerly known as Twitter, that 156 days had passed since the oral arguments in the Grayscale-SEC case<\/a>. He pointed out that the DC Circuit Court of Appeals delivered rulings for nearly all cases presented in March 2022 within 154 days. The exception, he mentioned, took 170 days for a decision.<\/p>\n He said<\/a> last week that he expected the court decision to come on a Tuesday or Friday in August, noting those are the two weekdays the court typically publishes its decisions.\u00a0<\/p>\n \u201cWhy should we expect August?\u201d Johnsson wrote in a separate post on X. \u201cBecause law clerks for DC generally cycle in\/out this month, so judges aim to clear [the] prior caseload before the new guard arrives.\u201d<\/p>\n Get the day\u2019s top crypto news and insights delivered to your email every evening.\u00a0Subscribe to Blockworks\u2019 free newsletter<\/a>\u00a0now.<\/strong><\/p>\n Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can\u2019t-miss tweets and more from\u00a0Blockworks Research\u2019s Daily Debrief<\/a>.<\/strong><\/p>\n Can\u2019t wait? Get our news the fastest way possible.\u00a0Join us on Telegram<\/a>\u00a0and follow us on\u00a0Google News<\/a>.<\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" The court is set to deliver its ruling on Grayscale Investments\u2019 lawsuit against the US Securities and Exchange Commission. Regardless of the outcome, it holds the potential to significantly impact the company\u2019s flagship bitcoin trust and the discount at which its shares currently trade. Grayscale sued the SEC in June 2022 after the regulator blocked […]<\/p>\n","protected":false},"author":2,"featured_media":140483,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[230,225,221,227,226,228,229,60,223,224,222],"class_list":["post-140482","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-brave","tag-coinbase","tag-crypto","tag-decentralised","tag-decentralized","tag-decentralized-exchange","tag-erc-20","tag-featured","tag-meme-coin","tag-robinhood","tag-solana"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/140482","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=140482"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/140482\/revisions"}],"predecessor-version":[{"id":147327,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/140482\/revisions\/147327"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/140483"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=140482"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=140482"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=140482"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What the discount could do after the court ruling<\/h2>\n
When will the court make a ruling?<\/h2>\n
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