Recently, the digital asset industry is undergoing an alarming spell that has caused global disruption. Investors have lost hundreds and thousands of dollars in a market-wide crash. The plunging prices including Grayscale were not only observed in the crypto market but also in stocks and other financial sectors. There are several reasons that have contributed to this dilemma.
Nonetheless, it has been observed that the biggest crypto fund in the world, Grayscale Bitcoin Trust (GBTC), has gone down along with the rest of the crypto sector. At the moment, it is trading at a major discount against Bitcoin. One of the most compelling reasons for this development is that Greyscale Investment LLC aims to transform this crypto fund into an exchange-traded fund (ETF).
GBTC Goes Down By Over 40%
The Grayscale Bitcoin Trust has a valuation of around $18.30 billion. However, the fund has degraded by more than 40% in this year alone. Even though cryptocurrencies are facing a severe bearish spell, their degradation is around 34%. Therefore, in comparison, GBTC is going down at an even faster pace. The fund’s price was about 31% under the low of Bitcoin that it holds. Analysis shows that this is the highest discount for the Grayscale fund.
Grayscale Bitcoin Trust itself trades like a normal stock. It gives investors a chance to get the exposure of BTC without actually buying or investing in it. Grayscale charges an annual fee of about 2% and takes a hold of the custody in exchange. Similarly, buyers get shares in the BTC fund.
Therefore, the significantly discounted price is offering a significant opportunity for investors to acquire shares in Bitcoin below its market value. But there is another twist in the tale, as investors have to agree to a six-month locked period. However, the current holders of the assets in the fund are at a loss because of the plunging prices.
Grayscale Pushes the SEC for GBTC Conversion
Experts believe that the degradation of GBTC’s value is because Grayscale wants to convert the fund into an ETF. The organization has held a meeting with the Securities and Exchange Commission to give a go-ahead on its application in this regard. Through this, the GBTC Fund will be converted into a physically-backed ETF.
However, US-based regulators have still not approved the spot Bitcoin ETF model. They argue that BTC’s volatility and price manipulation can cause disruptions in this conversion. On the contrary, the SEC is approving several Bitcoin futures ETFs. Grayscale has sent a letter to the SEC, arguing that it should be allowed to have a spot Bitcoin ETF. The company gave references to other approvals that were given by the regulating agency.
It is also reported that Grayscale representatives held a physical meeting with the SEC to discuss the matter and persuade them. The firm also complained of “a discriminatory approach” of the SEC. However, the matter is still under consideration and the SEC has to decide on this matter by July 6.
If the decision comes in favor of Grayscale, then the firm can reset its current discount to zero. Grayscale believes that it is the only way for the organization to combat the severe discount that has plagued its BTC fund. Through this transition, almost $8 billion will be unlocked in value for the fund.
The CEO of Grayscale, Michael Sonnenshein has indicated that the company might opt for a lawsuit if the regulatory agency does not give a decision in their favor. It shows that Grayscale is adamant about converting its fund into an ETF, as the firm does not see another way out of its current issues. As it looks like, the tussle might go on for a while to test both parties involved.