Grayscale Discount Hints At Spot Bitcoin ETF Denial

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Grayscale had filed for a Bitcoin Spot ETF after the SEC had greenlighted three Bitcoin ETF Futures for trading last week. Expectations were high that the regulatory body would also approve this ETF which would prove to be a better trading option for investors in comparison to the futures ETFs. The investment firm filed to convert its Grayscale Bitcoin Trust (GBTC) into a spot ETF.

The spot-based ETF would differ from the futures ETF in the fact that the fund would hold actual bitcoins. Futures ETF provides investors a way to basically bet on the price of bitcoin rather than a direct investment in the digital asset itself. That is why a spot-based ETF is expected to outperform a futures ETF. However, recent trends show that the market may not be very optimistic about the future of the spot ETF.

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Grayscale Bitcoin Shares Trade At A Discount

The Grayscale Bitcoin Trust (GBTC) continuously traded at a discount since February. In the past three months, the discounts have grown bigger and are nearing an all-time high for the fund. Grayscale shares have been trading at a discount of close to -17%, indicating that things are not looking good on the spot ETF front. The discount margins can serve as a proxy for determining what the expected outcome from the SEC would be.

These discounts, or premiums, are the difference between the Net Asset Value (NAV) and the share price of the trust. Grayscale’s plan is to turn its flagship fund into a spot ETF. A successful conversion of the fund into a spot ETF would see the discounts/premiums convert to zero. If the SEC approves the fund, then traders who bought the shares at a discount will wait for the convergence to zero to occur and realize gains from the spread.

Chart showing Grayscale discount over the months

Grayscale shares discount have increased over the months | Source: Arcane Research

If the market was expecting the SEC to approve Grayscale’s spot ETF, then the shares will not be trading at a high discount right now. The fact that the discount remains high indicates that the market is expecting the SEC to decline the filing.

Bitcoin Futures ETF chart from TradingView.com

BTC Futures trading north of $58K | Source: BTC Perpetual Futures Contract on TradingView.com

Future Of ETFs

There are now three Bitcoin Futures ETF approved by the SEC for trading and have begun trading. Besides the highly successful launch of the first ProShares ETF, there have been nothing remarkable about the subsequent trading days. All eyes are now focused on the next wave of ETFs coming into the market. Grayscale’s Spot ETF is still being considered by the SEC since its filing but there has been no update on this.

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Ethereum ETFs have moved to the forefront following the approval of the Bitcoin Futures ETF. Grayscale CEO Michael Sonnenshein has expressed confidence that the market will see the first Ethereum Futures ETF begin trading. Sonnenshein said that since the regulatory body had approved a bitcoin ETF, then it stands to reason that the approval of an Ethereum ETF could be coming soon.

Featured image from iStock, charts from Arcane Research and TradingView.com

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