GBTC discount drops below 10% as SEC met with Grayscale

For the first time in more than two years, the Grayscale Bitcoin Trust (GBTC) discount to its net asset value (NAV) has dipped below the 10% mark.

Grayscale Bitcoin Trust (GBTC)

The decline to -9.77% at the previous market close is its lowest since July 2021, reflecting a closer alignment between the market price of the shares and the actual value of the underlying bitcoin, as per YCharts data.

GBTC has been trading at a discount due in part to the fact that shares can’t be redeemed. Shareholders looking to exit have to sell to other investors, a dynamic that shifted the trust from its previous premium status to a discount following a cryptocurrency market squeeze in 2021. This shift was partly attributed by JPMorgan analysts to institutional investors cashing in on the premium and the emergence of new bitcoin exchange-traded funds (ETFs) in Canada.

Recently, GBTC shares traded at $30.45, marking a roughly 25% increase over the past month. This rally followed the U.S. Securities and Exchange Commission’s (SEC) decision not to appeal the D.C. Circuit Court of Appeals’ verdict from August. The court had set aside the SEC’s earlier decision to reject Grayscale’s attempt to convert its trust into an ETF. While it’s still possible for the SEC to deny Grayscale’s request again, the likelihood appears low, especially since the SEC has been actively engaging with other spot-ETF applications.

The discount’s contraction from over -40% coincides with renewed optimism regarding the SEC’s potential approval of a spot bitcoin ETF in the U.S. This sentiment was buoyed by recent meetings between the SEC, Grayscale, and BlackRock about their respective spot bitcoin ETF applications.

In related news, Cathie Wood’s Ark Invest has continued to adjust its holdings, with its ARK Next Generation Internet fund (ARKW) selling off 36,168 GBTC shares worth around $1.1 million. This sale follows a pattern of trades that included shedding GBTC shares worth over $2 million in two days.

Meanwhile, Ark Invest has been rebalancing its portfolio, evidenced by the sale of 139,506 GBTC shares from ARKW earlier in the month, and the purchase of 113,326 shares of Block, Inc., potentially in reaction to Cash App’s reported increase in bitcoin profits for Q3.

As the crypto market watches these institutional movements, Bitcoin itself has seen a 2.5% increase in value over the last 24 hours, trading at $37,543, signaling a broader market uptick.