Grayscale BTC Trust ETF conversion proposal receives overwhelming approval
Investors express their views on why the SEC should approve Grayscale’s BTC Trust’s conversion to a spot ETF.
The Securities and Exchange Commission of the United States has invited public comment and input on a proposed rule change that would transform Grayscale’s Bitcoin Trust into a spot-based exchange-traded fund (ETF).
A notice of filing a proposed rule change to allow Grayscale Bitcoin Trust to be listed and traded as a spot-based exchange-traded fund drew a lengthy list of comments, with a strong majority in favour.
On Feb. 15, Bloomberg’s senior ETF analyst Eric Balchunas reviewed some of the more recent comments and noted that 95 percent support the planned switch.
Numerous responders to the SEC proposal said that since the commission had previously authorised futures-based exchange-traded products, a spot-based product was clearly the next step. Others emphasised that the US risks lagging behind nations like as Canada, which has already allowed similar investment products.
A spot-based fund would be physically backed by the asset itself, as opposed to being backed by futures contracts from the Chicago Mercantile Exchange (CME), as current Bitcoin ETFs are. Another remark noted that the present fund generates arbitrage possibilities for ordinary traders.
“The closed end fund’s existing structure results in the fund’s price trading at a premium or discount to net asset value, creating arbitrage possibilities for more knowledgeable traders to prey on naive ordinary investors.”
Grayscale’s Bitcoin Trust has been trading at a significant discount in recent months as investors speculate and hedge against the ETF receiving SEC approval. According to Ycharts, the fund was trading at a discount of 24.75 percent at the time of writing. This implies that at the current price of BTC, which is roughly $43,600, the reduced fund’s price would be around $32,500.
One investor said that he placed his whole life savings in the fund and is weary of the SEC attempting to safeguard investors, adding that the regulator is just looking out for the “wealthy.” The financial authority has often cited an insufficient level of investor protection as a rationale for postponing or rejecting crypto-based investment products.
Grayscale first mentioned the possibility of converting the world’s largest Bitcoin fund to a spot ETF in October. On Feb. 4, the SEC postponed a decision on the $37 billion GBTC fund’s conversion, citing the same well-known concerns about manipulation, liquidity, and transparency.