Grayscale Trusts’ Discounts Narrow as ETF Approval Hopes Rise

Grayscale Trusts’ Discounts Narrow as ETF Approval Hopes Rise
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The Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE) have been experiencing a significant narrowing of their discounts to the net asset value (NAV) of their holdings. This tendency proposes a growing optimism among investors that the U.S. SEC will approve Grayscale’s bid to convert its trusts into exchange-traded funds (ETFs).

For more than two years, GBTC traded at a broadening discount to the value of the Bitcoin it holds. However, this movement has changed in recent weeks. On Friday, GBTC shares traded at a discount of 15.87% to the trust’s NAV, a level last seen in December 2021. The discount has been steadily narrowing since reaching a record low of nearly 50% during the height of the bear market in December last year.

Similarly, the Grayscale Ethereum Trust (ETHE) has seen its discount fall to 16%. This is a significant decrease from the 48% discount observed at the start of the year. The narrowing of the discounts suggests that investors are becoming more confident in the trusts or that demand for the shares is increasing. 

Grayscale Trusts’ Discounts Narrow as ETF Approval Hopes Rise

Why Investors Are Optimistic About Grayscale’s ETF Bid

If the discounts narrow significantly or disappear completely, it could lead to a substantial return for investors. The optimism is likely fueled by the SEC’s choice not to contest the D.C. Circuit Court of Appeals’ verdict from August, which overturned the regulator’s denial of Grayscale’s efforts to transition its trust into an ETF. The SEC had until Friday midnight to challenge the decision.

The crypto market has undergone a significant transformation. The recent uptick in various cryptocurrencies reaching new heights can be largely attributed to the burgeoning popularity of exchange-traded funds (ETFs). According to the latest data from CoinMarketCap, Ethereum (ETH) is currently valued at $2,052. This represents a 12% increase over the past week.

The possibility of a spot ETF launch in January 2024, with Grayscale probably taking the lead over other issuers, is being discussed. The expected approval is largely foreseen to open the doors to a considerable influx of mainstream capital.


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