Grayscale Successfully Appeals SEC Bitcoin ETF Proposal, BTC Price Soars to $27,600

Bitcoin is surging strongly following news that Grayscale has achieved a legal victory against the SEC regarding the proposal to convert GBTC to a Bitcoin ETF.

Grayscale Successfully Appeals SEC Bitcoin ETF Proposal, BTC Approaches $27,000

SEC Ordered to Reconsider Grayscale's Bitcoin ETF Proposal
According to a ruling by the U.S. District Court of Appeals for the District of Columbia, Grayscale has been declared the winner in a lengthy legal battle with the SEC over the proposal to convert the GBTC trust product into a Bitcoin spot ETF.

Specifically, the court found that the SEC did not provide a reasonable rationale for its decision to reject Grayscale's proposal, despite the company presenting specific evidence linking Bitcoin prices to BTC futures prices on CME - an index included in SEC-approved Bitcoin futures ETFs in October 2021.

As a result, the judge declared that the SEC must carefully review Grayscale's Bitcoin ETF proposal and nullify its previous rejection.

However, it should be noted that the court's ruling does not guarantee that the SEC will approve Grayscale's request to convert GBTC into a Bitcoin ETF.

According to legal experts, the SEC has 45 days to appeal the court's decision. The SEC could request an appellate review and provide new evidence to clarify its argument, or even elevate the case to the Supreme Court. Conversely, the SEC could comply with the court's ruling, reevaluate Grayscale's Bitcoin ETF proposal, and then find new grounds to reject it if desired.

This marks the second recent legal setback for the SEC, following its securities lawsuit with Ripple (XRP).

As previously reported by Coin68, Grayscale has long sought to convert the GBTC trust into a Bitcoin spot ETF to address the significant discount of GBTC shares compared to the underlying asset, Bitcoin, due to the absence of a redemption mechanism between the two.

However, the SEC rejected Grayscale's proposal in June 2022, leading the company to file a lawsuit against the SEC.

BTC immediately jumped 5.5%, from $26,000 to nearly $27,700 on the news.

1-hour chart of BTC/USDT pair on Binance at 09:45 PM on August 29, 2023

What is GBTC?
Grayscale Bitcoin Trust (GBTC) is an investment product created by Grayscale, a leading cryptocurrency investment firm within the Digital Currency Group conglomerate. Grayscale issues GBTC shares representing Bitcoin holdings. Each GBTC share represents 0.00090435 BTC.

Details about GBTC on August 29, 2023. Source: Grayscale Website

These shares can be traded on secondary stock exchanges, allowing institutional and retail investors with brokerage accounts in the U.S. to access the world's largest cryptocurrency without directly holding it. In return, Grayscale charges an asset management fee of 2-2.5% annually to GBTC shareholders.

According to data from the Grayscale website, the company currently holds $16.2 billion in Bitcoin within the Grayscale Bitcoin Trust. In addition to Bitcoin, the company offers trust products for other major cryptocurrencies such as Ethereum, Solana, Filecoin, Chainlink,... with a total managed asset value of over $21.7 billion.

Statistics of Grayscale's cryptocurrency investment trust products on the evening of August 29, 2023. Photo: Grayscale

Thanks to the prospects of a Bitcoin ETF, the price discount of GBTC shares relative to BTC on the market has significantly narrowed in recent months, now standing at less than 25%. At one point, this discount hit a low of -48.5% in December 2022.

Discount between GBTC and BTC prices in the last 3 years. Source: Ycharts (August 29, 2023)

Bitcoin ETF Prospects Continue to Ignite Hope
The keyword "Bitcoin spot ETF" has been extremely hot recently as major Wall Street players like BlackRock, Fidelity, WisdomTree, Valkyrie, VanEck, Invesco,... have each filed applications to establish this product, with the first deadline for SEC decision set for early September.

Many experts believe that with recent developments, the probability of SEC approving a Bitcoin spot ETF is now at 65%, despite the SEC historically rejecting such products due to concerns over speculative trading, manipulation, and fraud in the Bitcoin market.