25 Oct 2021

Low expectations for a spot bitcoin ETF

Shares in the Grayscale Bitcoin Trust have never traded at a higher discount – indicating that the market is not expecting the SEC to accept a spot-based ETF.
Grayscale Premium
Source: NYDIG, Glassnode
Grayscale has just filed to convert their $40 billion Grayscale Bitcoin Trust (GBTC) into an ETF. It will be spot-based and hold actual bitcoin - not bitcoin futures as the already approved ETFs. Does the market expect SEC to approve GBTC as the first spot bitcoin ETF in the US? We can use the GBTC premium/discount as a proxy for the market's expectations that the SEC will approve the ETF. The GBTC premium/discount is the difference between the trust's share price and the Net Asset Value (NAV) per share. If Grayscale turns GBTC into an ETF, an active redemption program will be in place. In such a scenario, the premium/discount should converge to 0. Therefore, if there is a discount, traders expecting SEC to approve the ETF will buy shares at a discount and wait for it to converge to 0, earning the spread. GBTC has been trading at a discount since February. The discount has become even bigger the last three months and sits close to an all-time high at -17%. Based on the massive Grayscale discount right now, it looks like the market is not expecting the SEC to approve of Grayscale’s spot-based ETF.
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