Grayscale – the world’s largest bitcoin fund – reportedly met with the Securities and Exchange Commission (SEC) privately last week. The company argued that the commission should approve its transition to a Bitcoin Spot ETF to unlock more than $8 billion in value for its investors.
Why Convert Grayscale?
In a presentation shared with CNBC, Grayscale claimed that a Bitcoin spot ETF would be “no riskier than a Bitcoin futures ETF”. The company believes that both spot and futures markets are influenced by the same inputs, due to their significant overlap in constituents and tightly correlated prices.
Grayscale currently holds over 640,000 Bitcoins on behalf of over 850,000 US accounts. This represents around 3.4% of the total Bitcoin supply, worth $18.6 billion at the time of writing.
The fund operates as an avenue for firms like Cathie Wood’s Ark Invest to gain price exposure to Bitcoin. However, the technicals of the fund are different from those of exchange-traded funds, causing it to track the price of Bitcoin less accurately.
Currently, Grayscale’s real trust – GBTC – is trading at a 25% discount to its underlying Bitcoin holdings. The company argues that this discount will disappear upon conversion to an ETF, bringing immense value to current investors.
Fighting the SEC
Grayscale’s campaign to transition its fund has been lengthy and arduous. Unlike equivalent bodies in other countries, the SEC has been extremely hesitant to approve a Bitcoin spot ETF, over fears of market manipulation.
Yet Grayscale refuses to back down on its ambition and continues to lobby the commission to allow its conversion to a spot ETF. He has already encouraged his investors to send more than 3,000 letters to the SEC in support of his claim, even threatening to sue them if they don’t.
As CEO Michael Sonnenshein maintains, the commission has failed to treat two similar products alike between futures ETFs and spot ETFs. As such, if the commission rejects Grayscale’s application, it may be liable for an Administrative Procedure Act violation.
