Grayscale focuses on converting GBTC to Bitcoin ETF in anticipation of SEC approval

Preparing for listing on the New York Stock Exchange

On the 1st, Grayscale Investments, a major U.S. cryptocurrency investment company, published a blog titled, “What will happen if GBTC is listed on the NYSE Arca as an ETF?”

The company is focusing on converting its current investment fund, GBTC, into a Bitcoin ETF and listing it on the New York Stock Exchange Arca, saying, “It is only a matter of time before the listing of a Bitcoin spot ETF is approved.” emphasized.

In this blog, the company’s Chief Legal Officer (CLO) Craig Salm and Chief Financial Officer Edward McGee answer frequently asked questions about the characteristics of GBTC (Grayscale Bitcoin Trust) and Bitcoin ETF conversion. That’s what I explained.

GBTC is the world’s largest Bitcoin investment trust, holding more than 3% of all Bitcoins currently in circulation (624,947BTC: Bitcoin Treasuries data). It is a “closed-end product” that was released as a private placement for institutional investors and qualified investors in 2013, and cannot be refunded before the redemption date or canceled early, and is an unlisted stock market “OTC Market (OTCQX)”. Transactions are only permitted.

As a result, GBTC is prone to price discrepancies between the primary market and the secondary market, and in the bull market of 2021, the secondary price had a 30% premium, whereas in the bear market of 2012, the secondary price was at a premium of 30%. In April, it recorded a 48% discount (minus premium).

connection:What is Grayscale’s investment trust “GBTC”? Why is the price discrepancy with spot Bitcoin attracting attention?

What the conversion to ETF brings

Grayscale explains, “The innovativeness of the ETF product structure is that it has an arbitrage mechanism that allows shares to be created and redeemed on a continuous basis to accommodate premiums and discounts.” Therefore, he pointed out that by converting GBTC into an ETF, such premiums and discounts (negative divergence) are expected to disappear.

According to Mr. McGee, as of November 29, 2023, GBTC’s assets under management are approximately 3.4 trillion yen ($23.4 billion), with a negative premium (discount rate of 8.09% ($1.8 billion, $9,000 ≒ 277.2 billion yen)). ) is traded.

He added that if GBTC were to be listed on NYSE Arca as an ETF, assuming the current negative premium disappears, “that would mean $1.8 billion in value would be released to investors through arbitrage.” Ta.

Listing date is uncertain

Regarding the timing of approval for GBTC’s listing on NYSE Arca, Mr. Salm replied, “Unfortunately, it has not been determined.” The U.S. District of Columbia Court of Appeals’ decision at the end of August this year to allow reexamination of GBTC’s rejection of GBTC’s Bitcoin ETF application by the U.S. Securities and Exchange Commission (SEC) is an unprecedented situation, and the time frame for approval is unprecedented. He said the line was uncertain.

However, the SEC did not appeal this decision. On November 20th, it was reported that Grayscale held a meeting with the SEC regarding an application to convert to a spot-based Bitcoin ETF, and behind the scenes, moves toward approval are steadily progressing. It is seen as.

Regarding the timing of approval for a physical Bitcoin ETF, Bloomberg ETF analyst James Seifert said, “I think there is a 90% chance that the SEC will approve a Bitcoin ETF by January 10th, There are no guarantees.”

connection:SEC meets with Grayscale to see new developments in Bitcoin ETF listing application

careful preparation

Documents filed on November 29 revealed that Grayscale has renewed its GBTC contract for the first time since 2018. The plan includes changing the collection of fees from monthly to daily, and adopting an omnibus account system to make stock redemptions smoother.

Additionally, Grayscale announced on the 2nd that it has hired John Hoffman, former head of the Americas at investment management company Investoco and an expert on ETFs, as managing director and head of distribution and strategic alliances. Investoco is one of the largest ETF issuers in the US, currently trading over 200 ETFs in the US market. Its assets under management (AUM) amount to approximately 62 trillion yen ($425 billion).

We’re proud to share that John Hoffman has joined Grayscale as our new Managing Director and Head of Distribution and Strategic Partnerships.

Learn about his perspectives on our industry and our world on our blog: https://t.co/ZLZ64bthKL https://t.co/ZLZ64bthKL

— Grayscale (@Grayscale) December 1, 2023

connection:Will the virtual currency Bitcoin price accelerate its rise in 2024? Grayscale Market Report

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