GBTC value shrinks after BlackRock applied for spot Bitcoin ETF


In the wake of BlackRock’s application for a spot bitcoin ETF, Grayscale Bitcoin Trust’s (GBTC) share price fell to a level it hasn’t reached in nearly a month on Friday. 

BlackRock’s Application for Spot Bitcoin ETF Unfavourable For GBTC 

A day after investment management firm BlackRock applied for a spot bitcoin exchange-traded fund (ETF), the difference between the share price of Grayscale Bitcoin Trust (GBTC) and its net asset value shrank on Friday, falling to a level not seen in nearly a month.

According to TradingView data, the price of GBTC shares increased by more than 8% in the last day to close to $14, outperforming the digital asset the fund owns. Bitcoin (BTC) gained 3.5% during the same time frame to reach $25,800.

Calculations show the discount is currently at about 40%. According to YCharts, this is the lowest level it has been at since mid-May, down from 44% earlier this week but still much higher than the 35% level it hit earlier this spring.

The news that BlackRock, the largest ETF issuer in the world and a mainstay in the traditional finance sector, was attempting to register a spot BTC ETF with the U.S. SEC caught the attention of many crypto analysts, who were eager to see how GBTC’s discount would respond. Over the past two years, a number of investment managers—including WisdomTree, VanEck, and Ark Investment Management with 21Shares—have attempted to register such a product, but the SEC has thus far denied every application.

Analysts have remarked that BlackRock’s application, however, might be a game-changer because of its influence and reputation. According to a tweet from Eric Balchunas, senior ETF analyst at Bloomberg, the financial business has received regulatory permission for ETFs in 575 instances as opposed to one denial.

Grayscale, a division of Digital Currency Group (DCG), is at odds with the SEC over the agency’s refusal to allow it to convert its closed-end GBTC fund into an ETF. Due to the fund’s prohibition on redemptions, investors can only sell their shares on secondary markets, which is how the so-called “GBTC discount” came to be.

Despite the recent surge in the cryptocurrency markets, GBTC shares were trading at a large premium to their net asset value. Notably, cryptocurrency hedge fund Three Arrows Capital placed unusually large wagers in an effort to profit on the premium, but the fund’s shares spectacularly collapsed as the price of cryptocurrency plummeted last year.

Nancy J. Allen

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Source: https://www.thecoinrepublic.com/2023/06/17/gbtc-value-shrinks-after-blackrock-applied-for-spot-bitcoin-etf/

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