After years of struggle, Grayscale, a cryptocurrency asset management company, has finally obtained approval from the U.S. Securities and Exchange Commission (SEC) for its GBTC Bitcoin Spot ETF application. As a result, the premium of GBTC has narrowed today to near zero, reaching a level consistent with the spot price since February 2021.
Background:
Bitcoin Spot ETF “First Day Trading Volume” Breaks $4.6 Billion! Grayscale GBTC Leads, BlackRock Follows
SEC Chairman Explains the “Reason for Bitcoin ETF Approval”: The Grayscale case is a turning point, but it does not mean we endorse BTC.
Yesterday, the U.S. Securities and Exchange Commission (SEC) approved 11 Bitcoin Spot ETFs, including Grayscale’s GBTC Bitcoin Spot ETF application, which officially started trading last night. The total trading volume of Bitcoin Spot ETFs on the first day exceeded $4.6 billion, with GBTC having the highest trading volume of $2.32 billion, accounting for nearly half.
According to Bloomberg analyst James Seyffart, a significant portion of this trading volume is from selling GBTC and buying other ETFs. The reasons for selling are speculated to be the disappearance of the long-standing premium, users taking profits, or considering the high management fees of GBTC and wanting to convert. In other words, it doesn’t necessarily mean that all of it is new capital inflow.
The narrowing of GBTC’s premium to near zero is worth noting. According to YCharts data, the discount of GBTC relative to its net asset value (NAV) has narrowed to nearly zero percent, reaching a level not seen since February 2021, as of the time of this report, -1.9%.
Since February 2021, the price of GBTC has consistently been lower than the value of the Bitcoin it holds, and it reached a historical low of nearly 50% discount in December 2022. However, with Grayscale’s legal victory against the SEC last summer, reigniting hope for the approval of GBTC Bitcoin Spot ETF application, the premium of GBTC has begun to significantly narrow.
Source: YCharts
Coindesk report
Sean Farrell, Managing Director of Digital Asset Strategy at FundStrat, believes that GBTC approaching NAV is a relief for the cryptocurrency field and a symbol of the industry’s transition to a new mature stage. For obvious reasons, GBTC has caused a lot of unnecessary pain in the market in recent years.
The previous discount was related to the nature of the fund. GBTC operates similarly to a closed-end fund, which means it lacks inherent arbitrage mechanisms and does not allow market makers to create or redeem shares on their own. Sean Farrell pointed out:
Future premiums/discounts will be minimal.
Matt Kunke, an analyst at GSR Cryptocurrency Research, stated that GBTC’s liquidity used to only be available in the secondary market over-the-counter trading, but now that GBTC has converted into a spot ETF, authorized participants can purchase and redeem ETF shares based on the net asset value, thereby linking the ETF market price to its asset value.
Looking ahead, Sean Farrell believes that since Ethereum Spot ETF is expected to be approved by the SEC next, Grayscale Ethereum Trust (ETHE) may pass its application, and it will be interesting to see how the premium of ETHE (currently -11.48%) will change.
Related Reports:
Bitcoin Spot ETF is Ready! Grayscale, Fidelity, Ark, Valkyrie… Submit “Registration Statements” to the SEC
Competing for the Spot ETF Market: Goldman Sachs Wants to Become an Underwriter for BlackRock and Grayscale GBTC (AP)
Trading Strategies After ETF Approval: Analysts: Funds Taking Profits, BTC Shows Signs of a Top