Grayscale’s Win Sparks a GBTC Trading Frenzy as Investors Bet on a Smaller Discount on the Bitcoin Price

Grayscale’s Win Sparks a GBTC Trading Frenzy as Investors Bet on a Smaller Discount on the Bitcoin Price
  • Grayscale’s court victory sparked⁣ a trading frenzy in GBTC shares, driving⁢ trading ⁣volume to its highest level since June 2022.
  • Some traders who had​ bet to‍ reduce the ‌discount⁤ to NAV took profits, but in this case, there could be more ‍upside to a conversion, the ⁤CEO of Digital ‌Asset Research said.
  • Grayscale’s flagship⁤ Bitcoin fund was at the epicenter of crypto implosions last year.

Grayscale Bitcoin​ Trust (GBTC) recorded its busiest trading session in 14 months. The ​uproar ⁤was sparked by a court⁤ loss by US ⁣regulators, making it more likely ⁣that GBTC can‍ be converted into an ETF that appeals to ⁣a ​broader investor​ base.

According to Yahoo data, nearly 20 ‌million GBTC shares changed hands⁤ during the day, the most since the crypto market​ crash in June 2022. The‌ share price rose 18% to nearly $21, the highest since‌ Bitcoin ⁢(BTC) hit $31,000 in⁤ mid-July.

The busy session followed a federal appeals court ruling⁤ that saw the US‌ Securities and Exchange Commission dismiss its trial⁣ by Grayscale Investments,‌ its flagship Bitcoin-focused ⁤fund, which ⁣manages ‌over $17 billion worth of BTC to convert⁢ to an Exchange Traded Fund (ETF). DCG, Grayscale’s parent‍ company, also owns AskFX.

The⁣ company‍ appealed the agency’s decision ​earlier this year, starting a legal standoff. The conversion would allow redemptions ⁢and close the‌ gap‌ between the fund’s share price trading on secondary⁢ markets and the net ‌value per ​share of ⁢the fund’s ⁢BTC ‌holdings.

BTC surged 7% to ‍$28,000 on⁢ the news, while the discount​ on GBTC’s‍ share price fell ‌to just⁣ 17% on the day.

Take advantage of the GBTC rebate on the‌ BTC price

The GBTC rebate played a key role​ in the crypto implosions of the last year. As crypto markets rallied over the past few years, GBTC shares ​have traded at a significant premium to net asset value. Notably, crypto hedge​ fund Three ​Arrows Capital⁢ made outsized bets⁢ to reap the bounty, but then exploded​ spectacularly when the fund’s​ shares fell​ into a discount in 2022 as crypto prices plummeted.⁣ After the collapse of FTX, the rebate widened ⁣to as much as⁤ 45%, ‌data from⁢ CryptoQuant shows.

However, some investors have bought GBTC shares‍ over the past three to six months, betting on a lower discount in the event of ⁣a⁣ positive ⁤court‍ decision, Doug ​Schwenk, CEO of crypto⁢ data‍ provider Digital Asset Research,⁤ explained in an email release .

Now some of them are taking‍ profits as‌ the discount has‌ plummeted.

“We are seeing some market participants exiting GBTC⁢ positions on the news,”​ said Schwenk. “Of ‍course, there are buyers taking these positions, ⁤probably hoping for a further drop ⁢in⁤ premium‍ should the conversion be approved.”

The trade could still ⁢yield nearly⁢ a 25% return if the discount is closed on top of any BTC ‍market gains, which “should be⁢ very attractive to arbitrageurs,” he added.

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