Shares of the Grayscale Bitcoin Trust were trading at an unprecedented discount of 35% following the Securities and Exchange Commission’s rejection of its application to transition into a spot market Bitcoin ETF.

The circumstance is ironic, given that the existing discount was one of Grayscale’s primary arguments for why the transition needed to take place. Last month, the company held a private meeting with the SEC, according to a CNBC report, in which it argued that converting its Bitcoin Trust (which trades as GBTC) to an ETF could potentially unlock $8 billion for investors by eliminating the discrepancy.

Back then, GBTC shares roughly traded at a 25% discount against the firm’s underlying Bitcoin, meaning it was 25% less expensive to buy GBTC than the Bitcoin that it represents. Yesterday, that discount grew to as wide as 35%, based on a calculation of Grayscale’s net asset value last night. Specifically, while its Bitcoin per share stood at $18.62, the market price of each share was only $13.32


Meanwhile, the price of Bitcoin has continued to fall, now down to around $19,000, following the SEC’s rejection of Grayscale’s ETF application. This has helped to bring Grayscale’s total share value slightly closer to parity with its Bitcoin holdings, as the value of the latter decreases.

An ETF is a type of investment vehicle that provides indirect exposure to an asset, such as gold, without the need to own and store the asset itself. A Bitcoin ETF would allow investors who are uncomfortable directly managing cryptocurrency to gain exposure to the asset, along with corporations that may be barred from directly purchasing Bitcoin by internal charter.

Grayscale is the largest crypto asset management company in the world. Its Bitcoin Trust holds nearly $12.9 billion in assets under management as of Wednesday.

But many investors consider GBTC a less than ideal investment vehicle for Bitcoin exposure. Unlike an ETF product, it's not easy to either create or redeem shares of GBTC in response to Bitcoin’s market movements. This is why supply and demand for GBTC shares can widely vary from that of Bitcoin at any time, creating price discrepancies.

GBTC is now trading for just $12.28–or 0.00064 BTC–per share.


Grayscale CEO Michael Sonnhenshein has both publicly and privately campaigned to persuade the SEC to permit Grayscale’s conversion since October. The fund’s efforts began immediately after the very first Bitcoin futures ETF was approved last year, spurring confidence that a spot ETF was soon to follow. A spot ETF would track the price of Bitcoin in real time while futures ETFs are derivatives products, regulated by the CFTC, that bet on what the price will be at a later date.

SEC Chairman Gary Gensler remains opposed to a sport market Bitcoin ETF, frequently citing market manipulation and consumer protection concerns. Grayscale sees it differently and believes Gensler and the SEC are “discriminating” against Bitcoin unfairly. Following the SEC’s latest rejection, the company immediately announced a lawsuit against the Commission for “failing to apply consistent treatment to similar investment vehicles.”

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