According to Bloomberg, the once-gargantuan discount on the $24 billion Grayscale Bitcoin Trust (GBTC) has all but evaporated as traders bet on the US Securities and Exchange Commission (SEC) approving a US spot Bitcoin exchange-traded fund (ETF) sooner rather than later. The narrowing discount is seen as a sign of growing optimism that physically-backed Bitcoin ETFs will be allowed to launch after years of denials. A wave of applications from asset-management giants has fueled this optimism.
GBTC has traded at a persistent discount to its holdings since early 2021 due to its structure, which doesn't allow for redemptions, essentially turning the product into a closed-end fund. However, the growing conviction that GBTC will be able to convert into a spot Bitcoin ETF has fueled the product's nearly 277% surge in 2023, far outpacing Bitcoin's 128% increase and narrowing the discount in the process.
Speculation that GBTC will be able to convert into an ETF following the SEC's blessing has sent billions of dollars flooding into the Grayscale trust this year. However, it's likely that those funds will quickly exit after the fact, according to JPMorgan Chase & Co. Analysts led by Nikolaos Panigirtzoglou predict outflows could total much more than $2.7 billion should Grayscale not convert into an ETF.
Despite the potential outflows, those who bought into GBTC at the height of its discount distress have reaped significant rewards. Bloomberg Intelligence ETF analyst James Seyffart believes it's unlikely that GBTC will head back into a premium before a conversion.
