GBTC Discount Shrinks To Two-Year Low of 7.5%

Shares for the Grayscale Bitcoin Trust (GBTC) – the world’s largest Bitcoin fund – are nearly back to parity with Bitcoin (BTC)’s price after trading deeply underwater for the past two years.

Their rising value reflects market confidence that Grayscale’s efforts to convert its fund into a Bitcoin spot ETF will prove successful.

The SEC’s Promising Meetings

Starting on Wednesday night, GBTC’s discount to NAV ratio shrank as low as 8.6%, according to Bloomberg ETF analyst Eric Balchunas.

The discount reflects the difference between the market cap of GBTC’s shares versus the total value of all BTC held by the trust.

According to the most recent figures from Grayscale’s website, the fund holds $33.75 in BTC per share, compared to a market price of $31.21 right now – a mere 7.5% discount as of Friday.

The reduction was “likely prompted by their updated filings/SEC meeting” on Wednesday, the analyst said.

At the time, separate memos from the Securities and Exchange Commission (SEC) showed that executives from Grayscale, BlackRock, and others held meetings with the SEC’s Division of Trading and Markets on Monday to discuss their respective ETF applications.

The meetings appeared to concern how fund managers would redeem shares of their trusts for underlying BTC whenever the shares began trading at a premium or discount to NAV. While firms like BlackRock are pushing for an “in-kind” redemption model, the SEC wants an in-cash model that doesn’t require issuers to directly touch BTC.

Major investors like Cathie Wood and Mike Novogratz – who themselves govern funds sponsoring separate ETF applications – have noted increased engagement from the SEC in helping to sharpen their products before they reach the market.

Rising Confidence in GBTC

The trend has increased investor confidence that the agency might finally be willing to approve an ETF, inviting investors to buy both GBTC and BTC. Not only is an ETF expected to invite major institutional flows into BTC, but it will also immediately restore the value of GBTC shares to that of the BTC they represent.

That’s a mouthwatering prospect for early GBTC investors, who will be exposed to the upside of both assets if they invest in the fund prior to its conversion. Back in December 2022, GBTC shares traded at a whopping 48% discount from their underlying BTC at just $8 per share.

Bloomberg analysts like Balchunas believe a Bitcoin spot ETF is 90% likely to be approved by January 10.