Here’s why Grayscale’s GBTC discount to NAV is narrowing

October 16, 2023 07:39 AM PDT | By Invezz

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Here’s why Grayscale’s GBTC discount to NAV is narrowing — Image source: Invezz

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The Grayscale Bitcoin Trust (GBTC) discount to Net Asset Value (NAV) narrowed to the lowest level in 2023 as hopes that the Securities and Exchange Commission (SEC) will accept a Bitcoin ETF rose.

GBTC’s discount to NAV bottomed at almost -50% earlier this year and has been in an uptrend since then. The rally accelerated recently after Grayscale won a major lawsuit against the SEC, which had rejected Grayscale’s request to convert it into a spot ETF.

The SEC decided against appealing the lawsuit last Friday. Therefore, analysts believe that chances are high that the fund will accept the fund later this year. Grayscale hopes that the conversion will help to lower its discount to NAV.

The challenge for Grayscale is that the conversion into a spot ETF will lower its revenue. Grayscale charges a management fee of 2%, which is significantly higher than what other ETFs will charge.

The discount narrowed again on Monday after several news sites reported that the SEC had accepted the ETF application by Blackrock. That report pushed Bitcoin to a multi-month high of $29,000.

Analysts believe that the SEC will ultimately decide to approve a Bitcoin ETF fund for two main reasons. First, companies like Blackrock and Franklin Templeton have put in place surveillance measures that will reduce market manipulation.

Second, the SEC will aim to prevent another crypto lawsuit after it lost two major ones this year. It lost a lawsuit against Ripple and the one brought by Grayscale.

Some analysts expect that the approval of a Bitcoin ETF will lead to more BTC demand, which will push its price higher. They believe that these hopes have helped Bitcoin remain above $25,000 in the past few months.

Others believe that any potential gains will be short-lived. They cite the short-term pop that happened after the launch of the Proshares Bitcoin Strategy ETF (BITO).

The post Here’s why Grayscale’s GBTC discount to NAV is narrowing appeared first on Invezz.

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