Grayscale Files to Register Spot Bitcoin ETF

Grayscale Investments has filed to register a spot bitcoin ETF after the Securities and Exchange Commission elected not to appeal its defeat in court in August when a judge said the SEC's denial of Grayscale's application was "arbitrary and capricious."

Grayscale had filed an applcation last year with the SEC to convert its Grayscale Bitcoin Trust into an ETF, but the SEC rejected the application. The court ruling in August meant that the SEC had to reconsider Grayscale's application. 

Grayscale’s new filing is the most recent step in the firm’s quest to offer a spot bitcoin ETF. Current bitcoin exchange-traded funds track only bitcoin futures, while a spot bitcoin fund would hold the cryptocurrency directly. 

Other Spot Bitcoin Filings 

The filing is just one of several for spot bitcoin ETFs coming from firms ranging from BlackRock, the world's largest asset manager, to Bitwise Investments, a crypto-focused firm.

The SEC is also dealing with 19b-4 filings, which are filed by exchanges in concert with issuers to change SEC rules to allow spot bitcoin ETFs.

After the simultaneous approval of ethereum futures ETFs, the SEC may wait to approve all the spot bitcoin ETFs at the same time to avoid giving any one ETF a first-mover advantage.  

“We’re staunchly of the opinion that they are not going to pick a winner, and they’re going to let everyone have a fair chance to launch the same day,” Bloomberg analyst James Seyffart said in an interview. 

When the SEC approved the first bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO), the fund accumulated assets very rapidly and continues to dominate its category. 

A 'Broken Product' 

The Grayscale Bitcoin Trust has often traded at a big discount or premium to the value of the bitcoin it owns partly because it lacks a redemption mechanism. 

“It’s a broken product,” Seyffart said.  

This discount was more than 40% last year, but has shrunk to multiyear lows. The discount is now 13%, after the SEC declined to appeal the court ruling. Because a spot bitcoin ETF would likely track bitcoin’s price much more closely, the shrinking discount indicates a belief that the ETF will be approved. 

Financial advisors have been hesitant to embrace cryptocurrencies. A spot bitcoin ETF may convince many of them to consider the asset class.

“The approval of a bitcoin spot ETF by the SEC could significantly augment mainstream acceptance of bitcoin investing, increasing its accessibility to a broader investor base,” Steve Larsen, founder of Columbia Advisory Partners, wrote in a Forbes article Wednesday.