Grayscale — the world’s largest bitcoin fund — has long had its attempts to become a spot bitcoin ETF turned down by the Securities and Exchange Commission (SEC). Investors are now speaking out against this and have sent around 200 letters to the commission in support of the fund’s transition.
Grayscale Investors Speak Out
As reported by Bloomberg, the SEC received over 170 letters from Grayscale investors in February alone. This followed a public solicitation from the regulator last week, asking for their thoughts on Grayscale’s recent application and the potential Bitcoin spot ETFs present as a vehicle for fraud.
An exchange-traded fund (ETF) is simply a basket of securities (or cryptocurrencies) that tracks an underlying index. The public is free to buy shares of these funds in order to gain exposure to a given asset.
Many such products have emerged around the world to directly track the value of Bitcoin and Ethereum – but none have landed in the United States. At present, the SEC has only allowed some Bitcoin Futures ETFs to emerge, which are backed by futures contracts rather than actual cryptocurrency.
Michael Sonnenshein – CEO of Grayscale – reached out to investors, encouraging them to send letters to the SEC regarding the conversion of their funds into ETFs. He said investors had shown an outpouring of support for the conversion so far.
“For us, a lot of the letters have been echoing what we at Grayscale have been articulating for quite some time and continue to do so today,” he told Bloomberg, “that investors have been patient and deserve a spot Bitcoin ETF.”
GBTC under pressure
Grayscale Bitcoin Trust (GBTC) is currently a trust fund. Under this format, stock prices cannot be traded to accurately reflect market sentiment. As a result, the fund’s shares traded at a discount to its underlying Bitcoin for almost a year.
Shares have declined 17% since 2022 began – compared to Bitcoin’s 13% slump. On Thursday, prices closed a whole 25% below the value of its BItcoin holdings
Grayscale investors can feel the pain. All of their letters to the SEC were about the commission’s refusal to authorize a Bitcoin spot ETF.
One investor named Clay Craven wrote “I don’t feel I’m being protected by the SEC. It’s past time for the SEC to approve the GBTC ETF conversion and stop harming investors and the country by outsourcing capital to foreign countries where spot BTC ETFs are already trading and approved by regulators.”
Investor protection is the primary concern that SEC Chairman Gary Gensler cited when he expressed a preference for Bitcoin futures ETFs over spot ETFs.
