The Grayscale Bitcoin Trust (GBTC) experienced its most active trading session in 14 months, a surge triggered by a court loss for U.S. regulators that makes it more likely GBTC can be converted into an ETF. Nearly 20 million GBTC shares were traded throughout the day, the most since the June 2022 crypto market crash, according to Yahoo data. The share price surged 18% to almost $21, the highest since Bitcoin (BTC) hit $31,000 in mid-July.
The surge followed a federal appeals court ruling that the U.S. Securities and Exchange Commission must review its rejection of Grayscale Investments’ attempt to convert its flagship Bitcoin-focused fund, which manages over $17 billion worth of BTC, into an exchange-traded fund (ETF). If successful, 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 jumped 7% to $28,000 on the news, while the discount on GBTC’s share price narrowed to as low as 17% during the day. Doug Schwenk, CEO of crypto data provider Digital Asset Research, noted that some investors have been purchasing GBTC shares over the last three to six months in anticipation of a favorable court decision. Now, some of them are taking profits as the discount has collapsed.
We are seeing some market participants rotate out of GBTC positions on the news, Schwenk said. Of course, there are buyers taking on those positions, likely in hope of a continued collapse in the premium should the conversion be approved.
The trade could still provide a near 25% return if the discount closes on top of any BTC market gains, which should be very attractive to arbitrageurs, Schwenk added.