Grayscale stock soared nearly 9% amid federal hearing

Grayscale Bitcoin Trust (GBTC) is making waves in the market as its share price surged by almost 9% on March 7. The reason behind this could be a reversal of the SEC’s longstanding opposition to a bitcoin ETF.

A panel of Washington D.C. judges appeared to question the U.S. Securities and Exchange Commission’s (SEC) arguments during an appeals court hearing regarding GBTC’s conversion into an exchange-traded fund (ETF).

During the hearing, the judges asked the SEC about the connections between the bitcoin (BTC) spot and futures markets. Also, they questioned the agency’s argument that bitcoin futures ETFs would be more resistant to manipulation than spot bitcoin ETFs. 

This move by the judges is a positive sign for GBTC, which has been pushing for the conversion despite the SEC’s denial of their application.

What’s the saga about?

GBTC was launched in 2013 and initially traded at a premium to its net asset value (NAV) for several years as it was the only public-listed fund holding bitcoin as its primary asset. However, the premium flipped to a discount in 2022.

Grayscale has lobbied the SEC to address this discount and filed a lawsuit against the agency to push for the conversion from GBTC into an ETF. 

This move is crucial as institutional traders can create and redeem shares in an ETF, which can help close the gap between the fund’s price and the value of its underlying assets through arbitrage.

What does the SEC say?

The lack of federal oversight in the spot market is a major vulnerability that makes a spot ETF susceptible to fraudulent activities. The SEC compared it to bitcoin futures, which are closely monitored by the Chicago Mercantile Exchange (CME).

These concerns have led to the crypto community rethinking which side would emerge victorious from the case. Speculations are rife that the court could overturn the SEC’s decision and rule in favor of Grayscale by Q2 or Q3 2023.

This decision has far-reaching implications for Grayscale, which has been trying to turn GBTC into an ETF for years. If the court rules in their favor, it could open the doors for other crypto firms to follow suit, leading to a significant shift in the crypto investment landscape.