- The discount has decreased significantly this year.
- Legal victories in the Grayscale vs. SEC episode created positive sentiment.
The world’s largest Bitcoin [BTC] fund, Grayscale Bitcoin Trust (GBTC), has cut the discount on its underlying investments to the lowest level in almost two years, according to digital asset data provider CCData.
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GBTC is getting closer to the underlying Bitcoin
Data showed the $15 billion market capitalization product’s discount to net asset value (NAV) fell to 14.8% in October, the lowest level since December 2021. This was a significant improvement year-on-year (YTD).
Source: CCData
A fund’s discount to NAV essentially means that the market price of the fund’s shares traded at a lower price than the actual value of the assets held by the fund. Simply put, investors bought something for less than its value.
When the discount narrows, it generally means that investors had a more positive view of GBTC.
As noted above, the discount to NAV had increased to around 50% by the end of last year and remained around 40% for much of the first half of 2023. However, the last quarter marked a noticeable shift in sentiment.
A series of positive developments surrounding Grayscale Investments’ bid to convert the trust into a Bitcoin ETF could explain the reversal.
GBTC benefits from legal victories
Unlike trust products, which occasionally deviate from the value of their underlying assets, a spot ETF keeps the value of the fund in line with the asset value.
Recall that the US Securities and Exchange Commission (SEC) rejected the application last year, citing failure to adhere to investor protection standards. Next comes Grayscale archived an appeal requesting a review of the supervisor’s decision.
A court ruling earlier in August agreed with Grayscale’s arguments and ordered the SEC to review its decision. The verdict raised hopes of a conversion in the near future, while also reducing the discount between GBTC and NVA.
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The positive sentiment peaked after SEC decided not to appeal the verdict.
CCData observed the developments and said:
“The discount is likely to continue to decline due to continued anticipation surrounding Grayscale’s push for the conversion of GBTC Trust into an ETF product.”