Amid a legal breakthrough, the Grayscale Bitcoin Trust (GBTC) experienced its most active trading day in over a year, driven by optimism following a court decision that could pave the way for GBTC’s conversion into an ETF. With nearly 20 million shares changing hands, a surge of 18% in share price to around $21 marked the highest point since Bitcoin’s value reached $31,000 in mid-July.
The heightened activity came in response to a federal appeals court ruling that mandates the U.S. Securities and Exchange Commission (SEC) to reevaluate its refusal of Grayscale Investments’ bid to transform its primary Bitcoin-focused fund—worth over $17 billion in BTC—into an exchange-traded fund. The parent company of Grayscale, DCG, also holds ownership of CoinDesk.
The outcome of the appeal, which led to a legal standoff earlier this year, can bridge the gap between the fund’s share price in secondary markets and the net value per share based on the fund’s BTC holdings. Bitcoin surged 7% to $28,000 in response, and the discount on GBTC’s share price contracted to a low of 17% during the day.
Notably, the GBTC discount played a significant role in recent market fluctuations. Previous years saw GBTC trading at a premium to its net asset value during crypto market rallies, but the tide shifted in 2022 due to declining crypto prices, causing the fund’s shares to trade at a discount. As a result, some investors who had bet on the discount narrowing in case of a favourable court decision have begun to capitalise on their gains.
According to Doug Schwenk, CEO of Digital Asset Research, there’s a shift in market sentiment as participants adjust their GBTC positions. Some are exiting their holdings, while others see an opportunity to capitalise on potential further premium collapses if the conversion is approved.